EUR/USD Rallies as ECB Signals Caution, Eyes 1.1820 Resistance

Policy Divergence Fuels EUR/USD Advance

EUR/USD extends its winning streak, trading near 1.1755 as European markets kick off Friday’s session. The European Central Bank’s December meeting outcome has become a pivotal driver for the pair, with rate decisions and forward guidance reshaping market expectations around Euro strength. The ECB’s decision to hold rates steady, combined with leadership commentary indicating no rush for additional stimulus, has provided underlying support for the common currency against the US Dollar.

Christine Lagarde’s recent remarks underscored a flexible, data-responsive approach to monetary policy—rejecting any predetermined rate trajectory. Market consensus increasingly points to rates remaining elevated through 2026, a narrative that contrasts sharply with earlier easing expectations. Meanwhile, shifting dynamics on the US side have introduced fresh volatility. Trump’s indication that the incoming Fed Chair would pursue a more accommodative policy stance—and his preference for a Federal Reserve aligned with his economic vision—has sparked fresh conversations about central bank independence and policy bias. Such rhetoric could weigh on Dollar appeal, potentially benefiting EUR/USD in the near term.

Technical Picture Points to Clear Resistance

From a technical standpoint, EUR/USD maintains a constructive setup above the 100-day exponential moving average (positioned at 1.1635), affirming the medium-term uptrend. The Relative Strength Index hovers around 59.8, reflecting healthy momentum without entering overbought territory. Price stability above the Bollinger Bands midpoint (1.1738) suggests consolidation strength.

The 1.1820 level emerges as the first meaningful overhead barrier for bulls eyeing further gains. A daily close above this threshold could unlock additional upside potential. Conversely, a pullback beneath the Bollinger midpoint would bring 1.1655 into focus as the initial support zone. Notably, the tightening Bollinger Bands signal compressed volatility, suggesting a breakout may be imminent once fresh catalysts emerge.

Market Outlook

Current technicals and macro developments align to favor selective buying on dips until volatility expands and clearer directional bias materializes.