EURUSD rose significantly during the last days of 2019, after the pair found a local bottom at the 100-daily moving average which comes around 1.1060. Now, the euro holds above the 200-daily moving average and remains upbeat, trying to cling to the 1.12 handle. The common currency struggles to stay positive on the day and the move seems to be due to some profit taking, while in general, the euro bulls remain in the game. 

On the data front, upbeat German and Eurozone PMIs helped to lift the common currency initially. Still, it was not enough to drive the priced substantially higher. German IHS Markit purchasing managers’ index for manufacturing fell to 43.7 last month and was slightly above the preliminary reading of 43.4. Still, the index came in at a five-month high of 44.1 in November and remained below the 50.0 mark for the twelve’s consecutive month.  
On a positive side, German 10-year government bond yields rose to their highest since June, resulting in a decent gap between the German and US yields. Also, the common currency as well as risky assets in general were supported by China’s central bank decision to cut its Reserve Requirement Ratio by 50 basis points. By the way, the Caixin manufacturing PMI in China slipped to 51.5 in December but still remained in the positive territory, so investors cheered the news from Beijing.

  Moreover, there are positive signals from the trade front, as the US leader Donald Trump said that the United States and China will sign a phase one trade deal in January 15 and will start further negotiations afterward. 

As such, there are enough positive signs in the markets now to support the euro bulls’ efforts, with the probability of challenging the recent highs around 1.1240 remains. However, in the short term, the pair needs to confirm a break above 1.12 and hold above the 200-daily moving average at 1.1140 not to waste the upside momentum. After some profit taking, the European currency could regain the bullish impetus and target fresh highs. Once above 1.1240, the pair may extend the rally towards 1.1270.


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