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EURUSD hit a new 3-year high above 1.2200 and is holding above this level after breaching 1.2100 last week. The pair surged to 1.2239 for the first time since December 2014, after extending a rally that started off the low 1.1900 handle.

On the daily chart, trend and momentum technical indicators are bullish, keeping risk to the upside. The 50-day and 200-day moving averages remain positively aligned. The RSI and stochastics are rising although reaching overbought levels. This suggests that momentum could stall and there would be a pullback in the near term.

Dips are expected to be supported at 1.2100. To the upside, there is very little major resistance until the 1.2500 area, although upon reaching 1.2300 there could be some fading in the rally.

Last Friday’s daily close above 1.2100 has confirmed the bullish breakout and a sustained move higher would see a continuation of the underlying bullish trend that started a year ago, with scope to extend the rally to the 1.3000 area in the longer term.

Currency pair EUR/USD

The EUR/USD is continuing with the uptrend after breaking the horizontal resistance levels (dotted red). Price seems to be in a wave 3 (purple) of wave 3 (pink) at the moment and potential dips are most likely retracements within the larger bullish movement.

The EUR/USD wave 3 (purple) is probably developing another internal 5 waves (orange).

Currency pair GBP/USD

The GBP/USDis showing a strong bullish breakout and rally. Price is now approaching a key resistance zone at 1.3750 area. The orange horizontal line is the bottom of wave 1 on a weekly chart and a break above it indicates an invalidation of a long-term bearish wave count.

The GBP/USD momentum is probably in a wave 3 (grey) and a retracement is most likely a wave 4 (grey).

Currency pair USD/JPY

The USD/JPY broke below the support trend line (dotted blue) and is continuing with the downtrend towards the Fibonacci targets.

The USD/JPY broke below the support trend line (dotted blue) and is continuing with the downtrend towards the Fibonacci targets.

Market movers today

US industrial production, final euro area HICP December inflation figures and Chinese Q4 GDP data are the highlights of the data calendar later in the week.

Today, the Bank of England's newest external member, Silvana Tenreyro, is due to speak about productivity growth in a first speech that could hold clues to her out look for interest rates, ahead of the UK's inflation release tomorrow.

In Sweden, Valueguard house price indicators for December are due out , where we look for another decline (see next page).

Selected market news

In Japan, the Bank of Japan kept purchases unchanged. In addition, Governor Haruhiko Kuroda stated overnight that easing measures will stay in place until the inflation target has been met .

Late on Friday, the ECB's Jens Weidmann stated that ‘as far as central bank interest rates in the euro area are concerned, however, the immediate risk of change is currently low. After all, the Governing Council has made it clear that interest rates will remain at their current levels for a longer period of time and well beyond the time horizon of net asset purchases.....a faster end to net asset purchases with a clearly communicated end-dat e would have been just ifiable' and the full normalisation of monetary policy will therefore be a long path', thus signalling that rate hikes are still a while away.

On Friday, US Treasury Secretary Steven Mnuchin said he was confident that an agreement would be struck to avoid government shutdown before the current short -term spending bill expires on 19 January – either with a long-term or short -term deal.

On Saturday, Iraq was supporting the call for OPEC oil production cuts to remain in place throughout 2018. There has been some speculation about whether OPEC would end cuts early following the recent price rally. In addition, the US oil rig count has started to rise again.

For the 24 hours to 23:00 GMT, the AUD rose 0.29% against the USD and closed at 0.7913 on Friday.

LME Copper prices declined 0.7% or $52.5/MT to $7070.5/MT. Aluminium prices rose 1.7% or $36.0/MT to $2215.0/MT.

In the Asian session, at GMT0400, the pair is trading at 0.7941, with the AUD trading 0.35% higher against the USD from Friday’s close.

The pair is expected to find support at 0.7878, and a fall through could take it to the next support level of 0.7816. The pair is expected to find its first resistance at 0.7973, and a rise through could take it to the next resistance level of 0.8006.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the EUR rose 1.21% against the USD and closed at 1.2179 on Friday, following news that German Chancellor, Angela Merkel’s conservative CDU party has reached an initial deal with Martin Schulz’s centre-left SPD to start formal coalition talks.

On the macro front, Italy’s seasonally adjusted industrial production remained flat on a monthly basis in November, defying market expectations for a gain of 0.6%. In the previous month, industrial production had risen by a revised 0.6%.

The US Dollar declined against its major peers on Friday, following sluggish US inflation and retail sales reports.

Data indicated that consumer price index in the US climbed 0.1% on a monthly basis in December, meeting market expectations and compared to a rise of 0.4% in the prior month. Meanwhile, the nation’s advance retail sales grew 0.4% MoM in December, missing market anticipation for an increase of 0.5%. Advance retail sales had registered a revised rise of 0.9% in the previous month.

Other data revealed that business inventories in the US rose 0.4% on a monthly basis in November, meeting market expectations and following a revised flat reading in the previous month.

In the Asian session, at GMT0400, the pair is trading at 1.2199, with the EUR trading 0.16% higher against the USD from Friday’s close.

The pair is expected to find support at 1.2089, and a fall through could take it to the next support level of 1.1978. The pair is expected to find its first resistance at 1.2261, and a rise through could take it to the next resistance level of 1.2322.

Going ahead, traders would focus on the Euro-zone’s trade balance figures for November, scheduled to release in a few hours.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the GBP rose 1.43% against the USD and closed at 1.3732 on Friday, triggered by reports that Spanish and Dutch Finance Ministers have agreed to work together to push for a “soft Brexit” deal.

In the Asian session, at GMT0400, the pair is trading at 1.3738, with the GBP trading slightly higher against the USD from Friday's close.

Overnight data showed that UK's Rightmove house price index rebounded 0.7% on a monthly basis in January, after recording a revised drop of 2.3% in the previous month.

The pair is expected to find support at 1.3601, and a fall through could take it to the next support level of 1.3464. The pair is expected to find its first resistance at 1.3812, and a rise through could take it to the next resistance level of 1.3886.

Amid a lack of macroeconomic releases in the UK today, investors would focus on global macroeconomic news for further direction.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD declined 0.22% against the JPY and closed at 111.03 on Friday.

In the Asian session, at GMT0400, the pair is trading at 110.76, with the USD trading 0.24% lower against the JPY from Friday’s close.

Earlier today, the Bank of Japan (BoJ) Governor, Haruhiko Kuroda reiterated the central bank’s pledge to maintain its massive stimulus programme until the economy achieves 2.0% inflation. Nevertheless, he expressed confidence in the Japanese economy and noted that the recovery will spur inflationary pressure.

The pair is expected to find support at 110.36, and a fall through could take it to the next support level of 109.97. The pair is expected to find its first resistance at 111.42, and a rise through could take it to the next resistance level of 112.09.

Going ahead, Japan’s tertiary industry index for November, scheduled to release tomorrow, will be on investors’ radar.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD declined 0.74% against the CHF and closed at 0.9688 on Friday.

In the Asian session, at GMT0400, the pair is trading at 0.9671, with the USD trading 0.18% lower against the CHF from Friday’s close.

The pair is expected to find support at 0.9635, and a fall through could take it to the next support level of 0.9599. The pair is expected to find its first resistance at 0.9739, and a rise through could take it to the next resistance level of 0.9807.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD declined 0.3% against the CAD and closed at 1.2485.

On the macro front, Canada's Teranet/National Bank house price index rebounded 0.2% on a monthly basis in December. In the previous month, the index had recorded a fall of 0.5%.

In the Asian session, at GMT0400, the pair is trading at 1.2452, with the USD trading 0.26% lower against the CAD from Friday's close.

The pair is expected to find support at 1.2408, and a fall through could take it to the next support level of 1.2364. The pair is expected to find its first resistance at 1.2526, and a rise through could take it to the next resistance level of 1.2600.

Ahead in the day, market participants would look forward to Canada's existing home sales data for December.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

Key Highlights

• The Euro made a nice upside move recently and it broke the 1.2200 resistance against the US Dollar.
• There was a break above a key bearish trend line with resistance at 1.2040 on the 4-hours chart of EUR/USD.
• The pair is now in a bullish zone and is eyeing more gains above 1.2200.
• China's new loans figure for Dec 2017 released by People's Bank of China posted 584.4B, less than the forecast of 1,000.0B.

EURUSD Technical Analysis

The Euro was seen trading in a bullish zone this past week above 1.2000 against the US Dollar. The EUR/USD pair is now extending gains above the 1.2200 resistance.

There was a bullish pattern formed above the 1.2000 level on the 4-hours chart of EUR/USD. The pair gained traction and was able to move above a key bearish trend line with resistance at 1.2040 on the same chart.

It opened the doors for more gains and the pair was able to move above the 1.236 Fib extension of the last decline from the 1.2088 high to 1.1915 low.

More importantly, the pair broke the 1.2180 and 1.2200 resistance levels. At the moment, the pair is trading a few pips above the 1.618 Fib extension of the last decline from the 1.2088 high to 1.1915 low.

These are positive signs and suggests that the Euro is trading nicely in the bullish zone above 1.2180. Should the pair continue to move higher, the next stop for buyers could be 1.2250.

On the downside, an initial support is around the 1.2180 level. However, the most important support sits near 1.2080-1.2100. The mentioned 1.2080-1.2100 area was a resistance earlier and now it is very likely to prevent declines.

The overall bias for EUR/USD is bullish above 1.2080. Similarly, the GBP/USD pair gained a lot of momentum and it was seen trading above the 1.3700 level.

On the other hand, the USD/JPY pair declined heavily and traded below the 111.00 level, which is a strong bearish signal.