EUR/USD turned quite bullish since October, although we saw a consolidation and a slight retreat at the end of December, which continued earlier last week until Friday, when the ISM services showed that this sector fell into contraction in December. Since then, the USD has been falling broadly and that’s helped to boost the Euro as well as other risk assets.

The market continues to digest a soft ISM report from Friday, concluding that the FED is less-likely to be hawkish. That has led to a USD selloff across the board and a 1% rally in most stock indices. The Euro is also a slight outperformer against the field as the market continues to cheer warm European weather and beaten-up European valuations.

Technically, this looks like a promising 2-day reversal after hitting a four-week low on Friday before the jump on ISM services numbers. So, EUR/USD is having another go at the May high of 1.0787 from last year. I think many traders are now trying to front-run a soft US CPI number on Thursday. The real test for the market will be if the USD weakness and strength in stocks can continue after CPI or whether some heavy profit-taking comes.

EUR/USD Daily Chart – The 50 SMA Turning Into Support

EUR/USD continues to show buying pressure 

So, EUR/USD has surged more than 10 cents since the end of September, when it was trading below 0.95, climbing above 1.07 in December. We saw a retreat earlier and the price dipped just below 1.05, but buyers came back last Friday and now the price is heading for 1.08. So, we will try to buy the dips lower on EUR/USD.

EUR/USD Live Chart