EUR/USD Forecast: A massive downtrend resistance line running since 2008 comes into play

The EUR/USD has reached a new 2018 top at $1.2555, breaking above the previous top of $1.2536. The main drive for the upwards move is the weakness of the US Dollar. The greenback is falling since Wednesday. The highly-anticipated inflation report came out slightly above expectations and initially sent the US Dollar higher. However, a positive turnaround in share prices alongside a further digest of the data sent the greenback quickly lower. The downward move in the Dollar and the upward move in stocks is still the main theme in the markets.

The euro is also supported by a slightly better than expected read in Germany: the Wholesale Price Index increased by 0.9% in January, far better than a minuscule advance of 0.2% that was on the cards. ECB Board member Benoit Cœuré did not provide any market-moving news.

Next, on the economic calendar, we find the release of US Building Permits, Housing Starts, and Consumer Sentiment. The stock market may continue to have an outsized impact on trading.

EUR/USD approaching a massive level

The recent rise of the EUR/USD has not only sent the pair to the highest levels since December 2014 but also close to a long-term line on the monthly chart. The long-term scope makes this downtrend more significant. 

Back in 2008, before the financial crisis erupted, the EUR/USD traded above $1.6000. From the peak in July 2008, the pair attempted to challenge the line in December 2009 and then got closer in May 2011. The last touch of this downtrend resistance came in May 2014.

Back to the present, to February 2018, the line stands at around $1.2650. The pair still maintains some distance from the level, but it is getting closer. Will the pair break or bounce? This high level will undoubtedly garner attention. 

The RSI on the monthly chart is at high levels but approaching overbought one. Perhaps we will see a correction before a move. As time passes by, this downtrend resistance also gets closer. Further above, $1.3280 and $1.4000 are the significant levels to watch for those trading the long-term on the monthly charts.

In the shorter term, the recent high of $1.2555 serves as an immediate resistance line, followed by the round number of $1.2600. On the downside, $1.2405 and $1.2350 are notable. 

More:  Live chart of EUR/USD