The EUR/USD rally gained steam in overnight trading as investors reacted to the dovish interest rate decision by the Federal Reserve and the strong economic numbers from Europe. The EURUSD is trading at 1.2225 ahead of the EU inflation data.
What happened: The key driver for the EUR/USD is the decision by the Fed to leave interest rates unchanged and commit to more asset purchases. This was in line with expectations. The only deviation was that the Fed did not offer any guidance about the duration of the purchases. The EURUSD is also reacting to the upbeat manufacturing and services PMI numbers released yesterday.
What next? Today, the euro will react to the final reading of the November CPI. In general, based on the flash estimates released earlier this month, economists believe that the headline CPI will fall by 0.3% in November. That will be worse than the previous increase of 0.2%. On an annualised basis, the headline CPI and core CPI are expected to drop by 0.3% and 0.5%, respectively. While these numbers are important, they will not have a major impact on the EUR/USD.
EUR/USD technical outlook
What next for EURUSD? On the four-hour chart, we see that the EUR/USD strong rally continued in the overnight session. The pair remains above the important support level of 1.2175. It is also slightly above the important 25-day and 15-day exponential moving averages while the accumulation and distribution indicator is rising.
Therefore, the path of least resistance is still higher, with the next main target being at 1.2250. The invalidation point for this trade will be at 1.2175.
EURUSD technical chart