Technical analysis – EUR/USD maintains tight range in ascending channel

EURUSD has been steadily crawling higher over the past week, holding near the lower bound of the upward trending channel that’s been developing since early October. The 20-day simple moving average (SMA) was capping the price action in the previous three sessions, but the pair managed to climb above it today. However, further increases will be challenging as the 50-day SMA is waiting to curb the advances not much higher at 1.1685.

The tight trading range is likely to continue at least until the Fed’s monetary policy meeting on Wednesday, with further volatility is anticipated on Thursday when the ECB is set to announce its rate decision. The odds are in favour of EURUSD heading into those major risk events, as the former is expected to cut rates and the latter to stay on pause.

The momentum indicators support the picture of strengthening upside in the short term. The stochastic oscillator is rising sharply and close to entering overbought territory, while the RSI is climbing steadily, reaching the 50-neutral level.

If the price is able to overcome the strong resistance region of the 50-day SMA and the 1.1700 level, the next test will be the upper bound of the bullish channel, which is approaching the 1.1800 handle. A successful break above 1.1800 would open the way for September’s four-year high of 1.1918, which if surpassed, would reinforce the longer-term uptrend.

However, in the event that the Fed and ECB meetings support a stronger US dollar and the price slips below the bullish channel, there’s unlikely to be any support until the 23.6% Fibonacci retracement of the January-September uptrend at 1.1507. Breaching this would accelerate the decline, with the next key support potentially coming from the 1.1380 zone, which has been a heavily congested area in the past and is near the August low of 1.1391.

Even lower, attention would turn to the 200-day SMA at 1.1310. Violating this would put the 2025 rally at risk, shifting the positive outlook to neutral.

All in all, EUR/USD is just about holding onto its bullish bias in the near term and desperately needs to reclaim the 1.1700 level to solidify the current upward momentum.