EUR/USD targets 1.2300 as USD selling remains unabated

• Monetary policy convergence supports.
• Boosted by upbeat Eurozone trade figures.        

The EUR/USD pair caught a fresh bid tone and broke its consolidative phase to the upside, now printing fresh three-year tops near 1.2280 region amid aggressive selling seen in the US dollar across the board.

The US dollar took a hit further against its major rival on a breach of January 2015 lows, triggering stops and falling as low as 90.12, as markets believe that the monetary policy divergence that we saw between the Fed and other global central banks is likely to narrow amid rising expectations of increased global interest rates this year.

The EUR bulls continue to ride higher on the German coalition breakthrough news as well as on the hawkish ECB minutes release, with investors now gearing up for a test of the 1.23 handle, following the release of better-than-expected Eurozone trade balance data.

Valeria Bednarik, Chief Analyst at FXStreet, notes: “The day will be slow, as the EU will only present its November trade balance, while nothing will come from the US amid a holiday keeping local markets closed. Thin market conditions, could exacerbate movements either side of the board.”

EUR/USD Technical Levels

The Dukascopy Bank Team wrote: “The strong upside momentum has allayed in this session due to the pair testing the monthly R2 at 1.2225. Technical indicators are located near their historic highs, thus pointing to a soon period of decline. This scenario, however, might not occur today, as the Euro could still push towards the weekly R1 at 1.2310. In case the bearish sentiment takes over, the weekly PP and the monthly R1 circa 1.2115 are likely to limit the pair.”