The euro is up big on the dollar (along with every other major peer except the Canadian and Australian dollar, and, of course, the yen). European Central Bank (ECB) board member Buba Weidmann said that the ECB would need to raise interest rates if inflation pressures mount, and the euro hit 1.3892 in thin holiday trade. Although trading up 72 pips to 1.3762, the euro seen heavy selling pressure and began to respect technical resistance.
The daily chart shows that the EURUSD fell back below the price action resistance of 1.3765. The breech, and squeeze, lets bears know the bulls are still alive, but it will be important for price to close above this to continue on upward. Above 1.3765, another level of resistance has been priced in at 1.3813.
Support on the daily can be seen primarily in two, near-term places. The ascending trend line and the 20 EMA will give the euro support between 1.3670-81, while price action support will be found closer to 1.3614.
The ADX and RSI are unreliable after moves like these as they tend to be abnormal. It is likely that the euro will begin to become range bound after a move like this, but it does not dismissed further upward movement. Low liquidity will remain until the first, maybe second, week of January.
The weekly chart is interesting, as well. The price action is forming a large wedge pattern (not to be confused with a triangle) when extended out three years. Price action on the weekly chart respected to daily’s secondary resistance at 1.3813. This resistance creates the flat trend line needed in the wedge, while the ascending trend line was created on July 8.
Given the bullish nature of EURUSD, resistance may be overcome when the holiday session comes to a stop. A close above 1.3813 will leave 1.3999 (1.34 more or less) ripe for the taken. The weekly chart shows no significant resistance after these levels, whereas the daily chart shows minor resistance near 1.3885/1.3900.
Support still lies near 1.3670-81, initially. 1.3600-14 remains as a secondary support line near-term. However, if the tied turns and risk assets begin to rollover, the euro may follow. In that scenario, EURUSD could easily pullback to 1.3550.