EUR/USD clocks 7-day high above 1.2060

The common currency continues to defy gravity in Asia, as the ECB December meeting minutes released yesterday called for a gradual adjustment in the forward guidance to better reflect the improved growth prospects.

The EUR/USD pair rose to a 7-day high of 1.2066 in Asia and looks set to extend the gains to 1.21 levels.

Kathy Lien from BK Asset Management the governing council has grown less dovish since their decision to cut bond purchases in October. Lien writes, " According to the "minutes" from their December meeting, the central bank saw "some comfort" in wage dynamics but low inflation remains a concern. Most importantly, they would consider a gradual shift in guidance starting in "early 2018" if reflation continues."

Though the bullish move looks justified, over exuberance could prove risky. Ranko Berich, Head of Market Analysis at Monex Europe, says, "ultimately the ECB may prove similarly hesitant to actually tighten policy until it sees the whites of inflation’s eyes - meaning caution should be the watchword for euro bulls expecting one-way appreciation for the single currency".

That said, the EUR/USD pair could move well above 1.21 levels if the US CPI and retail sales figures (due today) disappoint expectations.

EUR/USD Technical Levels

FXStreet Chief Analyst Valeria Bednarik writes, " Technically, the 4 hours chart shows that indicators have reached overbought levels before losing upward strength, but also that the pair bounced from its 100 SMA once again, while it also surpassed its 20 SMA, which gains traction upwards around the 38.2% retracement of the latest weekly bullish run. The pair also settled above the 23.6% retracement of the same rally, around 1.2000, now the immediate support, while the highs set monthly basis during the last couple of years around 1.2100 are the main upcoming resistance, as beyond the level, the pair will likely accelerate north, with the market then eyeing 1.2260 the next long-term resistance.

Support levels: 1.2000 1.1960 1.1920                                                  

Resistance levels: 1.2065 1.2100 1.2140