EUR/USD breaks higher as political rhetoric lifts FX – ING

FXStreet Insights Team FXStreet

EUR/USD pushed above key resistance near 1.1650, supported by firm political messaging from European leaders and improved sentiment. While the pair may extend toward the 1.17 area, seasonal US Dollar (USD) support and higher energy prices argue against a sustained Euro (EUR) breakout, ING's FX analyst Chris Turner notes.

Euro gains on supportive signals from Europe

"With the red lines of sovereignty being threatened, pressure is building for European political leaders to stand firm. FX markets seemed to like the speech from UK Prime Minister Keir Starmer yesterday that tariffs on allies were 'completely wrong'."

"EUR/USD broke technical resistance at 1.1640/50 overnight and looks biased to the 1.1690/1700 area. But as above, we think we are far from an environment that would trigger a major dollar sell-off. And again, we re-emphasise that seasonal factors tend to be more dollar-supportive, especially in February. Our one-month forecast of 1.17 for EUR/USD presented in our latest FX Talking feels about right."

"In terms of eurozone data today, we will be interested in the German ZEW (expected to head toward one-year highs) and also the eurozone November current account data. This has been euro supportive – but we do acknowledge the recent rise in energy prices, particularly for natural gas, which can weigh on the eurozone's external position. That is another reason not to get carried away with the EUR/USD top-side too soon."

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