EUR/USD clings to gains near 1.2230-35 region, highest since April 2018

• EUR/USD continued gaining positive traction for the fourth consecutive session on Thursday.
• Wednesday’s upbeat Eurozone PMIs, sustained USD selling remained supportive of the move.
• Slightly overbought daily RSI warrants some caution before placing any aggressive bullish bets.

The EUR/USD pair maintained its bid tone through the early European session and was last seen trading around the 1.2230-35 region – the highest level since April 2018.

The pair advanced for the fourth consecutive session on Thursday and built on the overnight bullish breakout momentum through the previous YTD tops, around the 1.2175-80 region. The shared currency remained well supported by upbeat Eurozone Manufacturing PMI prints. This, along with the prevalent bearish sentiment surrounding the US dollar, provided an additional boost to the EUR/USD pair.

The flash version of the Eurozone PMIs – released on Wednesday – showed that the manufacturing sector activity expanded faster than estimated and the services sector contracted less than anticipated. The data added to the optimism that the region’s economy is beginning to stabilize and that the recovery is gaining traction, which, in turn, was seen as a key factor that boosted the common currency.

On the other hand, the USD selling bias remained unabated on the back of optimism over COVID-19 vaccine rollouts and expectations for additional US fiscal stimulus measures. In fact, Republicans and Democrats were reportedly closing in on approving a $908 billion relief package. The US Congress is also working to pass a $1.4 trillion spending bill by Friday to prevent a government shutdown.

Apart from this, the ongoing move up could further be attributed to some technical buying on a sustained move beyond the 1.2200 mark. Meanwhile, RSI on the daily chart is already flashing slightly overbought conditions and warrants some near-term consolidation or a modest pullback before the next leg. That said, the path of least resistance for the EUR/USD pair remains to the upside.

Market participants now look forward to the US economic docket, highlighting the releases of the Philly Fed Manufacturing Index, Initial Weekly Jobless Claims and housing market data. This, along with the broader market risk sentiment, will influence the USD price dynamics and produce some short-term trading opportunities around the EUR/USD pair.

Technical levels to watch