EUR/USD Rally Faces Resistance at 1.1820 as Central Bank Policy Divergence Supports Euro

The EUR/USD pair has surged to approximately 1.1755 during early Friday European trading, maintaining a constructive technical setup with price holding firmly above its 100-day exponential moving average. The initial support floor sits at 1.1655, while 1.1820 represents the critical resistance threshold ahead.

Central Bank Policy Dynamics Fuel EUR Strength

The European Central Bank’s December decision to hold rates steady, coupled with ECB President Christine Lagarde’s emphasis on a data-dependent, meeting-by-meeting framework, has bolstered confidence in the Euro. Market participants are interpreting the ECB’s cautious tone as suggesting rate stability may extend through 2026, providing a more supportive backdrop for EUR/USD compared to previous expectations of aggressive monetary easing.

Meanwhile, developments in US monetary policy present a contrasting picture. Speculation that President Trump may select a dovish Federal Reserve successor—following Jerome Powell’s term expiration in May—has injected uncertainty into the Greenback’s outlook. The prospect of a more accommodative Fed stance could weigh on USD strength, creating favorable conditions for the major currency pair.

Technical Setup Remains Constructive

From a technical perspective, EUR/USD is trading decisively above the 100-day EMA at 1.1635, a key medium-term support line that maintains the bullish trajectory. The Relative Strength Index has climbed to 59.8, reflecting solid upward momentum without reaching overbought territory that might trigger a corrective pullback.

Price is currently positioned above the Bollinger Bands midline at 1.1738, though the tightening of the bands signals diminished volatility following the recent recovery phase. The upper band at 1.1820 establishes the immediate ceiling; a break above this level would open the door to extended gains. Conversely, slipping back below the middle band would pose risk of testing the lower band proximity near 1.1655.

The technical framework suggests that dips should attract buyers, provided volatility remains contained within current parameters. Sustained positioning above the 100-day EMA would preserve the upside opportunity for EUR/USD traders monitoring this major forex pair.