The euro currency has moved back towards the 1.2300 resistance level against the US dollar, as the greenback comes back under renewed downside pressure at the start of the first full trading week of 2021.
Bearish news surrounding surrounding COVID-19 infections in Europe, and the extension of the ongoing lockdown in Germany until January 31st failed to dent sentiment towards the single currency.
Additionally, slightly weaker-than-expected December PMI manufacturing data from the France and Germany failed to stop the EURUSD pair recovering back towards the technically important 1.2300 level.
The EURUSD pair came under heavy selling pressure last Friday, following a notable false breakout above the 1.2300 level. This technical benchmark has become something of a sticking point for euro bulls since December.
Going forward, the key for further EURUSD gains appears to be the US dollar index, and the Georgia run-off this week. The US dollar index is periliously close to breaking below the February 2018 low, around the 88.20 level.
From a technical perspective a break under the 88.20 level could open the floodgates for further US dollar weakness. If this does happen then the EURUSD pair could easily surge towards the 1.2400 level and beyond.
The Georgia race is likely to be the major catalyst for the greenback this week, and could determine whether we see a major reversal in the US dollar index or a major decline to fresh multi-year trading low.
EURUSD Short-Term Technical Analysis
The four-hour time frame continues to highlight the overall importance of the 1.2275 level. Multi-day price stabilization above this level may be needed to entice fresh technical buyers into the EURUSD long trade.
If bulls can start to gain real traction above the 1.2300 resistance level then technical analysis highlights the 1.2330 and 1.2400 levels as the key upside levels to watch.
Source by ActivTrader.
Lower time frame analysis also shows that a rejection from the 1.2300 resistance level, and a subsequent drop towards the 1.2130 support level would help to form a bearish reversal pattern.
According to the overall size of the potential bearish price pattern the EURUSD pair could drop towards the 1.1950 level over the short-term horizon.
EURUSD Medium-Term Technical Analysis
Looking at the daily time chart the 2018 high, around the1.2550 level, remains a valid upside target for bulls if the EURUSD pair can start to gain traction above the 1.2300 resistance level.
Worryingly for EURUSD bears is the upside potential for the EURUSD pair if price starts to trade above the 2018 trading high. Technical analysis clearly shows the 1.2840 and 1.3000 levels as valid targets, although the major upside target is likely to be the 1.4500 level.
Source by ActivTrader.
To the downside, a bearish reversal below major long-term trendline support on the monthly time frame, around the 1.2060 level, could cause traders to turn more cautious towards the EURUSD pair.
This could send the EURUSD pair into a muc-lower trading range in the medium-term between the 1.1800 and 1.2060 level. Without a clear bullish fundamental catalyst, pullbacks are likely to be seen as buying opportunities.