EUR/USD is currently strong, trading at about 1.1790 after hitting a three-month high of 1.1808. The 14-day Relative Strength Index (RSI) stands at 71, suggesting it may be overbought, which could limit further gains. The nine-day Exponential Moving Average (EMA) has crossed above the 50-day EMA, indicating a bullish trend. If the pair breaks the resistance at 1.1800, it may reach targets of 1.1880 and 1.1918, the highest levels seen since June 2021.

Immediate Support

Immediate support is at the nine-day EMA of 1.1745. If this level fails, the 50-day EMA around 1.1660 could be tested, which may lead to a drop to the three-week low of 1.1589 seen earlier. The pair is moving within an ascending channel, and the market outlook is positive as the long-term EMA rises. However, momentum indicators suggest that a consolidation phase may happen before the trend continues. This analysis uses AI for technical insights and is for informational purposes only, not trading advice.

Trading Considerations

EUR/USD is testing a three-month high around 1.1808, presenting a key decision point. While the upward trend in its channel is robust, the RSI at 71 suggests it may be overbought, indicating a possible pause or pullback. This situation reflects uncertainty about central bank policies as we move toward 2026. After the Federal Reserve kept rates steady in their December 17 meeting, US inflation data for November showed a rate of 2.5%, justifying their cautious approach. Meanwhile, Eurozone inflation is slightly higher at 2.8%, leading the European Central Bank to be slower in signaling rate cuts, which supports the Euro’s strength. For those expecting the bullish trend to continue, buying call options with strike prices above 1.1810 could be a good tactic. This enables us to potentially benefit from a rise toward the channel’s upper boundary around 1.1880 while limiting our risk. Options expiring in late January or February 2026 would allow time for the trade to develop after the holiday season. On the flip side, due to the overbought RSI and key resistance at 1.1800, it’s wise to consider a pullback risk. Buying put options with strikes near 1.1750 could profit from a move toward key support at the 50-day EMA around 1.1660. This strategy acts as a hedge or a speculative bet on short-term weakness. It’s important to note that trading volumes are usually low between Christmas and New Year’s, which can lead to significant price movements on minimal news. Historically, the post-holiday period, such as early 2024, saw increased volatility as institutional traders returned. A current consolidation might be setting the stage for a more significant move in January. Create your live VT Markets account and start trading now.

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