Euro powers past 1.20 level

EUR/USD is flat in Wednesday trade, after posting sharp gains on Tuesday. Currently, the pair is trading at 1.2073, up 0.01% on the day.

Euro hits 32-mth high

On Tuesday, EUR/USD climbed in impressive fashion, posting gains of 1.2%. The pair punched above the 1.20 line, a psychologically significant level. The euro has leveled off on Wednesday but managed to touch a high of 1.2087, its highest level since April 2018.

Euro boosted by solid German numbers

The US dollar continues to retreat against most of the major currencies, and this is one contributing factor in the euro’s impressive rally. This is reflected in the dollar index, which is trading near 2-year lows. With the Federal Reserve saying it may not have to raise rates until 2024, there is little incentive for investors to buy US dollars. In addition, the euro has received a boost from recent eurozone data, which was stronger than expected. Germany, the largest economy in the eurozone, posted excellent employment numbers, as unemployment rolls dropped by 39 thousand, defying the forecast of a gain of nine thousand. German retail sales rebounded with a strong gain of 2.6%, after a decline of 2.2% beforehand.

As well, eurozone and German Manufacturing PMIs remained well into expansionary territory. This isn’t to say that the picture across the eurozone is a rosy one, as the bloc is still trying to find its feet after the severe economic downturn due to the Covid pandemic. The ECB is expected to implement further easing at its final policy meeting of the year next week, but the fact that this move has been priced in by the markets could cushion the euro from a significant drop against the dollar.

EUR/USD Technical

• EUR/USD faces resistance at 1.2122. Above, the next resistance line is at 1.2174
• There is support for the pair at 1.1972, followed by a support line at 1.1874
• The 10-day MA line hovered just below the pair for most of November. However, with the euro’s sharp gains on Tuesday, the pair has moved some distance above this line

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