The euro climbed to a three-year high after German Chancellor Angela Merkel’s conservatives and rival Social Democrats reached a breakthrough in coalition talks. The news gave fresh legs to the current rally being driven by expectations that the European Central Bank may quicken the pace of trimming its massive monetary stimulus. On Thursday, minutes of the ECB’s December meeting showed policymakers could revisit their communication stance in early 2018, boosting expectations that they are preparing to reduce their vast monetary stimulus programme.
Last month the ECB left the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility unchanged at 0.00%, 0.25% and -0.40%, respectively. It also confirmed that its asset purchase program would be cut in half to €30 billion ($35.8 billion) a month starting in January and would continue, until the end of September or beyond if necessary.
Weekly chart is revealing a Bullish picture of EURUSD. On the chart, price action is forming a long term Cup and Handle pattern, which is generally a bullish continuation pattern. Take a look at below chart, initially price fell steeply but since March 2015 to July 2017 EURUSD started consolidating in a broad 1000 pips range (1.05 to 1.15), after that the range gets broken upside on 15 July 2017 with a long bullish candle (an indication of further up-move). After the breakout, the pair rose another 600 pips from 1.15 to 1.21, then after the pair again started consolidation to form a handle for completing the CUP and Handle price pattern. On 23 December 2017 price action gives an upside breakout to the Handle range, which is actually indicating the continuation of current bullish trend.
According to the pattern formation we can target 1.25 mark first.