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/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)

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.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Start trading forex today

Trade the largest and most volatile financial market in the world.

  • Spreads start at just 0.6 points on EUR/USD
  • Analyse market movements with our essential selection of charts
  • Speculate from a range of platforms, including on mobile

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.


Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.