EUR/USD Moves Higher As Short Squeeze Continues

Euro Continues To Gain Ground Against U.S. Dollar

EUR/USD is currently trying to settle above the resistance at 1.1450 while U.S. dollar is losing ground against a broad basket of currencies.

The U.S. Dollar Index is testing the support level at 95.25. In case the U.S. Dollar Index settles below this level, it will continue its downside move and head towards the support at the 95 level which will be bullish for EUR/USD.

Yesterday, euro got a boost after ECB indicated that it may start raising rates by the end of this year. It looks that too many traders were shorting the euro and that the recent rally is a major short squeeze.

It should be noted that ECB was not too hawkish, but even a hint at higher rates was sufficient enough to push the euro close to the yearly highs against the U.S. dollar.

Today, foreign exchange market traders will have a chance to take a look at Euro Area Retail Sales report for December. Analysts expect that Euro Area Retail Sales declined by 0.5% month-over-month. On a year-over-year basis, Euro Area Retail Sales are projected to grow by 5.1%.

In the U.S., Non Farm Payrolls report is projected to show that the U.S. economy added 150,000 jobs in January, while Unemployment Rate is expected to stay unchanged at 3.9%.

Technical Analysis

EUR/USD is testing the resistance at 1.1450. In case this test is successful, EUR/USD will get to another test of the resistance at 1.1465.

A move above 1.1465 will push EUR/USD towards the resistance level at January highs at 1.1485. If EUR/USD manages to settle above 1.1485, it will head towards the resistance at 1.1515. A successful test of this level will open the way to the test of the resistance at 1.1530.

On the support side, a move below 1.1450 will push EUR/USD towards the support level at 1.1435. In case EUR/USD manages to settle below the support at 1.1435, it will head towards the next support level which is located at 1.1420.

For a look at all of today’s economic events, check out our economic calendar.