EUR/USD Price Forecast – EUR/USD Trades Zig-Zag Amid Holiday Thin Market on Dollar’s Recovery
After closing the first couple days of the holiday-shortened week with modest gains, the EUR/USD pair came under pressure on Wednesday and erased its weekly gains. Despite a lack of macroeconomic data releases and thin trading conditions, the dollar gathered strength on the back of rising U.S. Treasury bond yields. Although it failed to break above the 97 mark, the US Dollar Index has managed to hold steady above 96.50 mark which is also supportive of USD’s strength in broad market. While the pair has dropped below 1.14 handle and went as low as 1.134 mark on dollar’s strength, broad based appetite for risk assets has helped limit losses following Wall Street rally and positive Asian equity market performance. Retail traders are looking for short term profit opportunities in year end trading session and this is keeping the volatility sustained to some extent and this has helped pair regain some of loss and climb back to 1.38 handle.
Increased Risk Appetite Helped Limit EURO’s Decline
As of writing this article, the EURUSD pair is trading at 1.1382 up by 0.36% on the day. On release front, European calendar is relatively silent except for release of economic bulletin from ECB, while US markets will see release of two first tier data updates – CB Consumer Confidence which has dovish forecast and new home sales data which is forecast to show an increase during the month of November. Regardless of macro data releases, the pair is expected to continue range bound price action as thin volume owing to year end festive celebrations which are expected to limit any major upside move. Next week is expected to open much the same, with a holiday on the offering for the first two days of the week. Italy’s budget woes are far from over and even France is beginning to toe the line somewhat, with European Commission leaders warning that if they accept France’s budget deficit, it would be a once-and-only-once event.
As political and economic woes continue to plague European markets, the pair is expected to continue experiencing two way price action once trading activities resume as usual post New year celebrations. When looking from technical perspective, the pair faces bearish pressure in immediate and near future trading sessions. The 4 hours chart shows that the pair is finding short-term support around its 200 SMA, around 1.1360, also the base of the weekly range, while a mildly bearish 20 SMA caps the upside around 1.1410. Technical indicators hold below their midlines without directional strength, all of which left a neutral stance. The pair also holds near its yearly low and below the 23.6% retracement of its yearly slump, this last at 1.1545, which, long-term, keeps the risk skewed to the downside. Expected support and resistance for the pair are at 1.1360, 1.1315, 1.1280 and 1.1440, 1.1480, 1.1510 respectively.