The euro has continued its impressive move higher for a third day on Friday, having rallied 2.75% off Wednesday’s lows, where it found support from the descending trend line it broke above the week before.
The pair has broken through 1.13 with relative ease despite facing initial resistance prompting a small correction.
This has opened up a move towards a key resistance area, at which point we should get a much better idea of the strength of this rally.
There is a large amount of resistance between 1.14 and 1.1525, which will provide a significant test for EURUSD bulls.
This has been a key zone of support and resistance this year and on this occasion, the descending trend line from 8 May last year and 233-day simple moving average will combine to make it even stronger.
That’s not to say it definitely won’t be broken but if it is, it is an extremely bullish signal. To take out this many technical resistance levels will take a very strong push from the bulls and could prompt quite an aggressive push higher afterwards, a move the fundamentals don’t really justify right now.
Alternatively, the pair could run into resistance here, at which point the decline that follows could provide strong insight into the next move for the pair. A small correction and another rally would suggest the market remains bullish, even at these levels. Anything larger could see 1.08 come under pressure, the lower end of the trading range it now finds itself in.