The euro exchange rate faces technical pressure, with policy divergence supporting medium-term rebound potential

Divergence in Central Bank Policies Supports Euro Appreciation

The European Central Bank maintained its policy interest rate unchanged at the December meeting, signaling a cautious stance. President Lagarde emphasized the flexible decision-making framework of the “meetings in sequence,” without making any clear commitments on the future interest rate path. Meanwhile, the Federal Reserve’s policy faces uncertainties—Trump expressed hope that the next Fed Chair would adopt a more accommodative monetary stance and maintain low interest rates during their term. These differing policy signals have provided relative support for the euro against the dollar and are reflected in the exchange rate movements.

Technical Outlook: EUR/USD at a Critical Level

Current Price and Trend

EUR/USD traded around 1.1755 on Friday morning, remaining in a relatively strong zone. The 100-day exponential moving average (EMA)( is sloping upward to 1.1635, with the exchange rate staying above this average, confirming the integrity of the medium-term uptrend. The Relative Strength Index (RSI)) has risen to 59.8, indicating that upward momentum is gradually strengthening, and it has not entered overbought territory, suggesting room for further upside.

Resistance and Support Levels

The middle band of the Bollinger Bands is near 1.1738, and the price has broken above this level. The upper band at 1.1820 constitutes the first resistance level; a daily close above this point would continue to trigger bullish momentum. The Bollinger Bands’ narrowing indicates that volatility has decreased after the previous rebound, and a period of consolidation may occur before a significant move. The support level below is at 1.1655, close to the lower Bollinger Band, serving as the last line of defense on the technical chart.

Trading Strategy Suggestions

From a technical perspective, as long as EUR/USD remains above the 100-day EMA, the uptrend remains intact. Investors can look for low-risk entry opportunities near 1.1655, with the first target at the 1.1820 resistance. If this level is broken, further resistance levels can be monitored. Caution is advised: if the price falls back below the middle band at 1.1738, the pace of decline toward the 1.1655 support may accelerate.

Given that the divergence in central bank policy cycles persists, the medium-term relative performance of the euro against the Chinese yuan and major currencies will depend on further economic data and policy statements. Currently, technical signals still favor entering long positions on pullbacks.