The EUR/USD broke-out yesterday as investors embraced a risk-on sentiment in the market. The pair, which is in its third consecutive week of gains, soared to 1.2073, which is the highest it has been since March, 2018.
There are several factors that pushed the EUR/USD price to a multi-year high. First, as I noted earlier today, the US dollar has been under pressure recently, a factor that has seen it fall to a 2018 low. That’s because of the overall reduction of global risks. There’s now a vaccine in line, Joe Biden is set to become president, and there are signs of a new stimulus.
Second, economic data released from Europe yesterday were generally positive for the EUR. In total, the manufacturing sector continued to do well in November in a signal that the bloc is still in a strong footing. While inflation remained low, this was in line with expectations.
Indeed, the same trend will be seen today when the European Union releases the producer price index (PPI) data. Economists expect the data will show that the PPI fell by 2.4% in October.
Today, the euro dollar price will also react mildly to the ADP employment numbers from the US. Economists expect the data will show that the private sector in the US added more than 410k jobs. That will be slightly higher than last month’s 365k. But this number rarely moves the pair because it comes two days before the nonfarm data.
EUR/USD technical outlook
A few days ago, I wrote that the EURUSD was ready for take-off. That happened yesterday as the pair soared to 1.2073. On the weekly chart, we see that the pair is above the short-term and medium-term moving averages. The Relative strength index has also continued to rise and is currently at 64.
This implies that there is more room to run for the current EUR/USD rally. If it happens, the next target to watch will be the February high of 1.2557. However, a move below the support at 1.1590 will invalidate this trend.
Euro dollar technical chart