EUR/USD Rally Continues as ECB Signals Cautious Stance; Eyes Set on 1.1820 Resistance

EUR/USD climbs toward 1.1755 as Friday’s European trading kicks off, riding a wave of policy divergence between the ECB and Fed.

The pair is maintaining strength above its 100-day exponential moving average, with the Relative Strength Index pushing toward 60, indicating positive momentum without reaching overbought territory. This technical backdrop supports the broader uptrend established over recent sessions.

Policy Divergence Fuels EUR/USD Strength

The European Central Bank’s December decision to hold rates steady while signaling limited appetite for aggressive cuts has bolstered the Euro’s appeal. ECB President Christine Lagarde reiterated the institution’s flexible, data-driven framework, avoiding any forward guidance commitments. Market participants are currently pricing in a scenario where ECB rates may plateau throughout 2026, offering relative support for the currency.

Conversely, shifting expectations around Federal Reserve leadership have weighed on the Dollar. As speculation mounts about potential successor options to Fed Chair Jerome Powell—whose tenure concludes in May—the possibility of a more accommodative monetary policy stance under new leadership has emerged. President Trump’s recent comments expressing preference for lower rates and a Fed leadership aligned with his administration’s priorities have added uncertainty around US monetary policy independence, potentially capping Dollar strength.

Technical Picture Points Higher

On the daily timeframe, EUR/USD is consolidating just below its initial resistance zone. The pair trades above the midpoint of its Bollinger Bands near 1.1738, with the bands themselves contracting, suggesting a potential volatility expansion ahead.

The first meaningful ceiling emerges at 1.1820, where the upper Bollinger Band sits. A break above this level could accelerate upside moves further. Support anchors remain at 1.1655, corresponding to the lower band—a level that would represent a meaningful deterioration of the current technical setup.

The alignment of the 100-day EMA with price action, combined with RSI readings in the 59-60 range, suggests the path of least resistance remains higher until new headwinds emerge. A sustained push above the daily resistance would validate the continuation of the medium-term bullish structure intact.