EUR/USD headed 1.2000 amid EZ economic and political optimism

• Sentiment lifted by the German Ifo sentiment data.
• Will DXY sustain the recovery?
• German politics and Fedspeaks in focus.

The EUR bulls took a breather in Asia, leaving the EUR/USD  pair in a consolidative mode near two-month tops of 1.1944, as focus shifts towards the Eurozone flash CPI estimate, US growth numbers and Fedspeaks due on the cards later this week for fresh trading impetus.

EUR/USD: Risks minor correction before further upside?

The sentiment around the Euro remains buoyed by the optimism over the Eurozone growth story, especially, after last week’s solid flash manufacturing PMI reports and the German business climate numbers for November.

Moreover, easing political worries surrounding the German political climate, after Merkel’s conservative party agreed on Sunday to pursue a “grand coalition” with the SPD, will also remain EUR-supportive in the week ahead.

Meanwhile, the major also benefits from the ongoing broad USD weakness, as the Treasury yield curve flattening continues with 10 yr-2yr spread at 59 basis points, the lowest since Oct. 2007.

Attention now turns towards the US new home sales data and FOMC member Kashkari’s speech due later today, as markets gear up for a data-heavy calendar this week.

EUR/USD Technical Levels

According to Omkar Godbole, Analyst at FXStreet, “The one-month 25 delta risk reversals gauge rose to a 4-month high of 0.45 on Friday, suggesting increased demand for the EUR calls. It adds credence to the bullish technical breakout on the charts and could yield a move to 1.20 or 1.2092."

Valeria Bednarik, Chief Analyst at FXStreet, explained, “according to the 4 hours chart, the pair is also bullish, despite technical indicators lost upward strength in extreme overbought territory, as the price ended some 15 pips below its high. In this last time frame, the 20 SMA has turned north almost vertically, now around 1.1830, also a strong static support level. Should the advance extend beyond the mentioned high, the pair has room to extend its gains towards the 1.2000 regions, en route to the high of 2015 and this 2017 at 1.2100. Support levels: 1.1890 1.1860 1.1825. Resistance levels: 1.1945 1.1980 1.2015.”