EUR/USD registers biggest quarterly gain since Q3, 2017

• EUR/USD rose by 2.8% in the fourth quarter of 2019. 
• Technical charts indicate the pair may witness a pullback on Thursday.

EUR/USD has entered 2020 on a positive note. 

The single currency gained over 2.8% in the fourth quarter of 2019, the biggest single quarter rise since the third quarter of 2017. Even so, the pair closed the year with a 2.2% loss. 

Macro factors support further gains

The continued de-escalation of the US-China trade tensions and signs of stability in the Eurozone economy favor further gains in the EUR. 

The People's Bank of China's (PBOC) latest effort to stimulate growth is also good news for the Euro, as China is Eurozone's biggest trading partner. The Chinese central bank will be reducing the required reserve ratio for commercial lenders by 50 basis points from Jan. 6, adding about 800 billion yuan ($115 billion) of liquidity into the financial system. 

While the macro factors are EUR supportive, technical charts are signaling scope for a pullback. 

Notably, the long upper wick attached to Tuesday's candle is a tell-tale sign of buyer exhaustion. Meanwhile, the 4-hour chart is reporting a bearish divergence of the relative strength index and the MACD histogram. 

So, a pullback to sub-1.12 levels cannot be ruled out. At press time, EUR/USD is trading at 1.1213.

Technical levels