EUR/USD jumps from the recent dollar weakness and ECB President talks

The EUR/USD has gained 1.5% since its November 4th bottom, a move that coincided with dovish US private labor data from the Challenger report.

With the U.S. government shutdown beginning to weigh on economic activity, attention has turned toward the Eurozone, which continues to send relatively solid signals:

Inflation remains stable in key economies like Germany and France (see comments from Villeroy), while growth, though modest, remains decent with a 52.5 PMI last week and retail sales up 1% year-over-year.

As confidence grows in the Eurozone’s more politically stable environment—with a few exceptions such as France—and fund managers continue diversifying away from the U.S. dollar, the euro has seen strong dip-buying flows.

Meanwhile, discussions around President Lagarde’s potential successor have emerged, with Knot, Nagel, and De Cos reportedly among the frontrunners—three strong policy voices within the ECB.

By the way, these three members tilt more on the hawkish/conservative side for the Euro, which plays a big role in demand for a currency. This conversation is one to track for the upcoming year, as Christine Lagarde's term finishes in 2027 (except for any early resignation on her part).

Adding to the supportive tone, European Commission President Ursula von der Leyen announced stricter rules on low-cost Chinese imports, a move interpreted as a sign of European strength, as reflected in today’s market reaction (however, there has been some mean reversion since)

Let’s now dive into the EUR/USD rally and spot the key technical levels for the most traded FX pair.

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EUR/USD has been on a V-shape recovery since last week, allowing the pair to break above its daily descending channel.

With the RSI turning positive and strong daily candles, the reversal looks decisive.

However, bears may find comfort in the 50-Day Moving Average coming as immediate resistance at 1.16625, right at the 1.1650 to 1.17 Pivot Zone.

Keep an eye on this zone which will serve as momentum guidance: breaking above points to a retest of the 1.18 bound, while rejecting it points to further descent (retest of the 1.15 handle).

Overall, the Daily trend looks like one of rangebound action between just below 1.15 to 1.18 until proven the contrary.

Levels to place on your EUR/USD charts:

Resistance Levels

• 1.1650 to 1.17 mid-range Pivot zone
• 1.1750 mini-resistance
• Resistance Zone around 1.18 (+/- 150 pips)
• Sep 2021 Highs – Resistance 1.19 to 1.1950 Zone
• Daily highs 1.1656

Support Levels

• 1.1550 to 1.16 range support
• 4H MA 200 Mini-support 1.16190
• 1.1475 to 1.15 Support Zone
• 1.1350 to 1.14 Support
• Weekly lows 1.15460

The price action has been evolving in a steep hourly upward channel.

However, some sellers appeared right at the entrance of the Pivot zone mentioned in higher timeframes, with the daily highs stalling at 1.15562.

Maintaining the rejection downward could point to a retest of the 1.16 handle which corroborates with the 50-H MA and the uptrend.

However, breaking new highs now would infer bull-dominance in the pair – Closing around the highs (less than 100 pips) mean that they won't give up this ongoing move.

Safe Trades!

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