EUR/USD hits four-month high, eyeing to test 2017 tops

   •  Sharp rebound in USTs fails to lend any support to the USD.
   •  Inching back closer to 2-1/2 year peak, touched in September.

The EUR/USD pair continued scaling higher on the first trading day of 2018 and has now jumped to its highest level in nearly four months.

Currently hovering around 1.2070-80 band, the pair has now moved within striking distance of testing 2017 tops and was being further supported by persistent US Dollar selling bias. 

Despite a sharp rebound in the US Treasury bond yields, the greenback continues to lose ground and has been one of the key factors driving the pair higher through the mid-European session.

Even today's mixed final Euro-zone PMI prints did little to stall the pair's strong bullish momentum, with the prevailing bearish USD sentiment acting as an exclusive driver of the strong run-up to its highest level since September 8.

Meanwhile, possibilities of some stops being triggered on a decisive break through a short-term ascending trend-line resistance near the 1.2030 region seem to have provided an additional boost to the pair's ongoing strong bullish momentum.

Today's US economic docket, featuring the only release of final US manufacturing PMI, is unlikely to influence the momentum, albeit a follow-through pickup in the US bond yields might now contribute towards capping additional gains, at least for the time being. 

Technical outlook

Valeria Bednarik, American Chief Analyst at FXStreet writes: Despite overbought, nothing suggests that the pair will change course, with scope now to test 2017 high of 1.2092. Beyond 1.2101, January 2015 monthly high, the pair will likely accelerate its advance, with 1.2140 as the next probable short-term bullish target.  Below 1.2000, the pair could correct lower, with the next intraday supports at 1.1960 and 1.1920, although buying interest will probably pare the decline well above this last.