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EUR/USD: secrets of resilience

The EUR/USD currency pair saw a short-lived drop toward the $1.3740 (December bullish channel support) during the European session, but found support there and quickly bounced to fresh daily highs at $1.3775.

The major currency pair didn’t show any strong immediate reaction to the today’s budget deal in Washington. The budget accord evidently increases chances for the earlier QE tapering in US, but, as many economists underline, it still needs to pass both houses of congress and does not address the debt ceiling issue. What is more, EUR is supported by the year-end capital repatriations by European banks. Markets have also become more optimistic on the EU banking union prospects these days.

We would expect the rally to continue in the coming days. EUR/USD has all the chances to retest the $1.3800/3830 area. However, a sustained break above here seems unlikely for now. The pair is expected to top around the $1.4000 mark – this is the 5-year trend line. Next support lies at $1.3650. 

Chart. Daily EUR/USD

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