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EUR/USD Price Forecast: Bulls await breakout above 1.1270 resistance, range top
- EUR/USD trades with a positive bias for the second straight day amid a broadly weaker USD.
- Hot Eurozone CPI reaffirmed ECB hike bets, lending additional support to the Euro and the pair.
- A breakout through a one-month-old trading range is needed to back the case for further gains.
The EUR/USD pair gains positive traction for the second straight day on Thursday, trading around the 1.1265 region during the Asian session, close to a near one-week high touched the previous day.
The US Dollar (USD) drops to a fresh low since late September as a Democratic sweep in the US midterm elections raised worries about fiscal gridlock, which could limit government spending and lead to slower economic growth. Furthermore, hopes for an end to the Iran war weigh on crude oil prices, easing inflation fears and triggering a further decline in US bond yields. This overshadows US Federal Reserve (Fed) rate hike expectations and continues to weigh on the buck, which, in turn, is seen supporting the EUR/USD pair.
Meanwhile, data released on Wednesday showed that Eurozone annual headline inflation rose to 4.0% in October, marking a three-year high. This further lifted bets for a 25-basis-point (bps) interest rate hike by the European Central Bank (ECB) in December, underpinning the shared currency and contributing to the EUR/USD pair’s bullish undertone. However, concerns about France’s deepening debt levels and political gridlock might hold back Euro bulls from placing aggressive bets and cap further gains for the currency pair.
From a technical perspective, the EUR/USD pair trades above the 200-period Simple Moving Average (SMA) on the 4-hour chart, with bulls still awaiting a breakout through the 1.1270 hurdle, representing the top boundary of a one-month-old range. Meanwhile, momentum indicators hold a constructive near-term bias, with the Relative Strength Index hovering in bullish territory just below overbought and the Moving Average Convergence Divergence (MACD) line staying in positive ground. This suggests that buyers still retain control.
That said, failure near the aforementioned barrier would signal fading bullish momentum and drag the EUR/USD pair to sub-1.1200 levels. Acceptance below the said handle might expose the lower end of the trading range, around the 1.1120-1.1110 zone, which, if broken decisively, will be seen as a fresh trigger for bearish traders and set the stage for an extension of the well-established downtrend witnessed over the past two months or so.
EUR/USD 4-hour chart
