Bullish view
Bearish view
- Set a sell-stop at 1.1080 and a take-profit at 1.1000.
- Add a stop-loss at 1.1200.
The EUR/USD price made a bullish breakout as the US dollar index continued its downtrend. The pair jumped to a high of 1.1112, its highest point since July this year. It has risen by more than 6.4% from its lowest point in October.
Risk-on sentiment continues
The EUR/USD price continued its strong comeback as investors embraced a risk-on sentiment in the market. This risk-on sentiment is evidenced by the ongoing US Treasuries comeback. The yield of the 10-year and 30-year retreated to 3.81% and 3.97%, respectively.
US bond yields peaked at over 5% a few months ago and have retreated to their lowest level since July. At the same time, the US dollar index (DXY) plunged by more than 50 basis points to $100.6. The index peaked above $107 a few months ago.
The other sign of the risk-on sentiment is the ongoing stock market rally. Data shows that the key indices like the Dow Jones, Nasdaq 100, and S&P 500 indices are hovering at their highest levels on record.
Additionally, the VIX index has retreated by over 50% to $12 while the fear and greed index rose to the extreme greed zone of 79. In most cases, the EUR/USD pair rises when investors have embraced a risk-on sentiment.
This view continued after the US published the latest inflation numbers. According to the Personal Consumption Expenditures (PCE) continued falling in November and are nearing the Fed’s target of 2.0%.
Therefore, there is a likelihood that the Federal Reserve will start cutting interest rates in the first quarter of 2024. Economists see the bank delivering three rate cuts during the year as the economy slows.
The European Central Bank (ECB) is also expected to also start cutting rates since the bloc is in a recession. Inflation has also dropped sharply and is nearing the bank’s target of 2.0%.
EUR/USD technical analysis
The EUR/USD pair continued its bullish trend as the risk-on sentiment continued. It rose to a high of 1.1106, a few points above the key resistance point at 1.1016, the highest point on November 29th. By moving above that level, the pair invalidated the double-top pattern that had been forming.
The pair rose above the first support of the pitchfork tool, which is a positive sign. It has also risen above the 25-period and 50-period moving averages while the Average Directional Index (ADX) spiked to over 30. Therefore, the pair will continue rising as bulls target the psychological level at 1.1200.
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