EUR/USD Forecast: Draghi Cannot Drag It Down as His Country Began Behaving

• EUR/USD continues trading on higher ground, supported by calm on Italy.
• ECB President Mario Draghi Draghi does not rock the boat in Brussels.
• The pair remains trapped in a downtrend channel.

EUR/USD trades above 1.1350, up on the day and holding onto its gains. Mario Draghi, the President of the European Central Bank, did not rock the boat in his prepared remarks to a committee of the European Parliament in Brussels. While he does note that the data is weaker since his last visit, he says that this is normal as the expansion matures.

Earlier, the common currency enjoyed the improvement around Italy. The rhetoric around Italy has markedly improved, pushing markets and Italian bonds higher. The spread between Italian bonds and the benchmark German ones remains below 300 basis points after slipping below 280 earlier, the lowest since October.

Both Matteo Salvini and Luigi di Maio, the heads of Italy’s two coalition partners, expressed flexibility around the budget deficit of 2.4% that the European Commission rejected twice. They opened the door to talks and also said that the response from Brussels was positive.

The clash between the euro zone’s third-largest economy and the EC seemed unbridgeable, and rhetoric from Italian politicians was elevated, to say the least. The calm is a big relief rally.

Additional factors that help the mood are the approval of the Brexit deal by EU leaders and reports about upbeat Black Friday sales, which push stocks higher.

EUR/USD Technical Analysis

While the pair is rising and the mood is good, the EUR/USD charts are still pointing in the other direction. The world’s most popular currency pair is trapped between downtrend support and downtrend resistance that accompany it since early last week. Moreover, EUR/USD failed to break above the 50 Simple Moving Average (blue line) and Momentum points lower.

Support awaits at 1.1355. It supported the pair last week and also earlier in the day. 1.1325 was the low point on Friday. The former double bottom of 1.1300, also a round number, provides considerable support. Further below, 1.1260 and 1.1215 are notable.

Looking up, 1.1395 is the initial line of resistance after the 50 SMA after serving as both support and resistance. Higher, 1.1425 capped EUR/USD late last week, just before the downfall. 1.1475 was the peak early last week — the November high of 1.1500, a very round number, towers above.