EUR/USD rises above 1.24 as DXY tests 89

• USD sell-off continues into the NA session.
• US 10-year T-bond yields erase the majority of daily gains.
• EUR/USD's adds nearly 200 pips since the start of the week.

The EUR/USD pair received an additional boost from the ongoing greenback weakness and peaked above the 1.24 mark for the first time in more than three years.As of writing, the pair was trading at 1.2404, adding a little over 100 pips, 0.85%, on the day.

Without a doubt, the unstoppable USD selling wave on Wednesday is the primary catalyst for the pair's impressive rally. After breaking below the 90 mark, the US Dollar Index fell sharply with a few short-lasting technical corrections here and there. Although the index seemed like it was trying to recover some of its losses after finding an interim support near the 89 handle during the first half of the NA session, it failed to rise above 89.20 and, once again, reversed course. The latest drop seems to be a product of the yield for the 10-year US T-bond retracing its daily gains to turn flat around 2.6%.

Earlier today, "obviously a weaker dollar is good for us as it relates to trade and opportunities,"  the U.S. Treasury Secretary Steven Mnuchin told reporters on the sidelines at the World Economic Forum in Davos, triggering the first leg down before the pressure increased later on disappointing Markit Services PMI data, which fell short of the market expectation of 54 as it came in at 53.3.

On Thursday, the ECB is going to release its interest rate decision and the monetary policy statement. “While the ECB had actually tried to hush any exit speculation with the October decision of “lower for longer”, strong macro data, a general fear in financial markets that inflation could return faster than anticipated and remarks by ECB officials have recently fuelled new speculation about the future of QE,” analysts at ING argued in a recently published report.

Technical outlook

Valeria Bednarik, American Chief Analyst at FXStreet, writes, "the 4 hours chart shows that the price has moved well above a now bullish 20 SMA, while technical indicators have reached overbought territory before losing upward strength, anyway consolidating, far from signaling a possible correction ahead. Higher highs are likely for the upcoming sessions, with 1.2460 becoming a possible short-term target. Profit-taking ahead of ECB's meeting is not out of question for late Asia/early Europe."

According to the analyst, supports for the pair could be seen at 1.2370, 1.2325 and 1.2280 while resistances align at 1.2425, 1.2460 and 1.2500.