EUR/USD: Continuing next leg up, looking for 1.2535

  • EUR/USD trading quietly after gaining on Wednesday.
  • US inflation dragging down the Greenback a key factor.

The Euro finished Wednesday closing higher against the US Dollar for the third day in a row; EUR/USD is currently trading close to 1.2460 ahead of European markets, flat in Asia with China's markets closed for Chinese Spring Festival.

The uptick in inflation, seen in the better-than-expected CPI data from the US yesterday, is decidedly unkind to the Greenback. As inflation continues to pick up steam in the American economy, the Euro can look forward to more gains against the USD, following double-digit gains in EUR/USD through 2017. As inflation begins to be a drag on the US Dollar and a boost to the Euro, EUR/USD is on pace to continue gaining through this year as well, provided the balance between market-wide risk aversion and USD-bearish fundamentals remains intact.

No major data remains this week for the pair, so market risk sentiment will be expected to take over choosing a direction for the pair from one session to the next, with risk appetite cooled today following early volatility in Asia trading.

EUR/USD Technicals

The pair logged high volatility yesterday, and the high/low marks going forward today sit at 1.2465 and 1.2275 respectively, while H4 charts show the pair gearing up to make a new high following the pullback last week to 1.2205. With Daily candles once again closing further away fro mthe 34 EMA, and trading well above the 200-day SMA at 1.1735, the next challenge for EUR/USD bulls will be to push the pair over 1.2537 to send EUR/USD trading at three-year highs, while shortselling will run into long-term support from 1.2092 to 1.2033.

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