EUR/USD Forecast: stops triggered, highest since December 2014

  • EUR got a boost from headlines indicating progress on German coalition talks.
  • US to release December Retail Sales and inflation data, this last seen little changed.

The EUR/USD pair maintains its positive tone, breaking above 1.2100, and trading now at its highest since December 2014. The pair got a boost from news that German party's leaders have reached a breakthrough in coalition talks, although no further details are out yet, and a government hasn't been formed yet, with more negotiations ahead in the coming weeks. Nevertheless, the news adds to the batch on strong macroeconomic figures in the region, while taking off some of the uncertainty over Merkel's leadership. The rally accelerated afterward, with the pair triggering stops above 1.2090.

There are big events scheduled in the EU, but the US will release its December Retail Sales and Inflation figures. Sales are expected to have posted a modest 0.4% advance in the month, while inflation is seen little changed, up 2.1% YoY and 0.2% in the month. Inflation has been the weak leg of the US economic recovery, unexplainable low even for policymakers. A miss in US inflation figures,  will only fuel the negative sentiment against the greenback.

In the meantime, the short-term picture is bullish for the pair, with technical indicators accelerating north, despite being in overbought territory in the 4 hours chart, and moving averages gaining traction upward far below the current level.  The pair needs now to hold above 1.2090 on pullbacks to retain the bullish stance, with an immediate resistance now at 1.2135, en route to 1.2170.

View Live Chart for the EUR/USD


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