EUR/USD Trend Analysis: Continued Strong Signals, Euro Exchange Rate Rebound Supported

On Friday during the European session, EUR/USD traded around 1.1755, showing an overall positive trend. This move is supported by both central bank policy factors and technical confirmation, which warrants close attention.

Central Bank Policies Support the Euro

The European Central Bank kept interest rates unchanged in December. President Lagarde emphasized adopting a “meeting-by-meeting” data-driven decision-making approach. This means that although markets expect further rate cuts in the future, the ECB has not pre-committed to a specific easing schedule, which helps stabilize euro expectations to some extent.

In contrast, the outlook for the Federal Reserve is different. The market generally expects the Trump administration to nominate a dovish successor to Jerome Powell as Fed Chair. Trump’s strong inclination towards low interest rates and potential impacts on the Fed’s independence could put downward pressure on the dollar. This policy expectation gap provides the euro with relative strength support and indirectly lifts its exchange rate against the RMB and other currencies.

Technical Confirmation of Uptrend

From the candlestick chart, EUR/USD remains above the 100-day EMA (moving average at 1.1635), indicating that the medium-term trend is still upward. The Relative Strength Index (RSI) is at 59.8, showing improving momentum without entering overbought territory, leaving room for further gains.

The Bollinger Bands provide a clearer pressure-support framework: the middle band is around 1.1738, the upper band resistance is near 1.1820, and the lower band support is at 1.1655. Recent narrowing of volatility suggests decreasing fluctuation. A break above 1.1820 could trigger a new upward wave. Conversely, if it falls below the middle band, caution is needed near the lower band support at 1.1655.

Trading Recommendations

The current environment favors buying on dips at lower levels. The key is to hold the 1.1655 support and closely monitor the breakout above 1.1820. Once EUR/USD effectively surpasses 1.1820, it is expected to continue its upward trend, which will also strengthen the euro’s position in the forex market and push up its exchange rate against the RMB and other currencies.

It is important to note that shifts in Fed policy, geopolitical risks, and other factors may still influence the trend. Investors should implement proper risk management.

(This analysis is for reference only and does not constitute investment advice)