EUR/USD in bullish consolidation near 1.2200 ahead of EZ data

• DXY meanders near 3-year lows.
• Gathering pace for further upside.
• Eurozone data eyed amid light trading.

The EUR/USD pair prolonged its upward trajectory and went on to hit fresh three-year highs at 1.2218, before having eased slightly to now consolidate near the 1.22 handle, as the bulls await fresh impetus for the next push higher.

The bulls take a breather after the latest upsurge, as they await fresh updates on the German politics, especially with the Social Democrat (SPD) leaders aiming to sell the deal to party members before a congress on Jan. 21 at which the delegates vote on the coalition agreement reached on Friday.

On Friday, the spot rallied more-than 200-pips after the EUR was boosted by the reports that the German party leaders reached a breakthrough on the coalition talks. More so, Thursday hawkish ECB minutes combined with broad-based US dollar sell-off also collaborated to the ongoing rally in EUR/USD. Meanwhile, solid US CPI and retail sales data failed to offer any respite to the USD bulls, knocking-off the USD index to fresh three-year lows of 90.53, where it now wavers.

Valeria Bednarik, Chief Analyst at FXStreet, notes: “This week is set to start in slow motion as the US will be on holidays, while the EU will only release November trade balance, hardly a market mover. That would give the pair a chance to consolidate/correct, although bulls´ conviction remains strong, and higher highs are still on the table. There won't be relevant macroeconomic releases until Wednesday when EU inflation will be out.”

EUR/USD Technical Levels

Bednarik adds: “Shorter term, and according to the 4 hours chart, technical indicators keep heading north despite being in extreme overbought readings, while the pair is far above bullish moving averages. Above the mentioned high, the pair has scope to extend its advance to 1.2260, a strong static resistance area, in where bulls may choose to take some profits out of the table. Beyond the level, however, speculative interest will begin thinking on 1.2500 as the next possible bullish target. Support levels: 1.2155 1.2100 1.2070. Resistance levels: 1.2220 1.2260 1.2300.”