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CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

EUR/USD technical analysis: further gains likely after breach of $1.20

This week’s advance by EUR/USD to above the psychologically-important $1.20 mark makes a further advance more likely.

EUR Source: Bloomberg

EUR/USD broke this week above the psychologically important $1.20 level for the first time since May 2018, extending the advance that has lifted the pair from a low just above $1.06 in little more than eight months. With this upward momentum still in place, there is now a possibility that its underlying strength could lift it still more, with the high just above $1.25 touched in February 2018 a reasonable long-term target.

EUR/USD price chart, daily time frame (3 May 2017 – 2 December 2020)

EUR/USD chart Source: Investing.com
EUR/USD chart Source: Investing.com

As the chart above shows, EUR/USD is not yet overbought, with the 14-day relative strength index, or RSI, still below the 70 level that implies an overbought market. Moreover, any short-term downside is likely to be limited by the 20-day moving average (DMA) at $1.188, with the 50-DMA and the 100-DMA just below $1.18 providing further support ahead of last month’s low just above $1.16.

From a fundamental perspective, there is a fly in the ointment: the European Central Bank has indicated previously that it does not want EUR/USD above $1.20 for fear of damaging EU exports to the US and because it would represent a tightening of monetary policy at a time when policy should be loose to help the EU economy recover from the downturn caused by the coronavirus pandemic.

However, more recently, the European Central Bank (ECB) has indicated that it regards the euro’s levels against a range of currencies as more important than just its exchange rate against the US dollar so it might not intervene in the markets – even verbally – to attempt to weaken it as some euro bulls fear.


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CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

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