Consolidation range prevails, risks tilted to the downside

Current price EUR/USD: 1.1316

  • The US Dollar strengthens ahead of the FOMC meeting on risk aversion.
  • US economic data is weaker than expected.
  • EUR/USD is under pressure but is recovering above 1.1300.

The EUR/USD pair is lower on Monday amid the general strengthening of the US Dollar as global stock prices continue to fall. The risk aversion environment continues to favor the greenback even as US yields retreat.

The main US stock indices are down sharply. The Dow Jones fell more than 2.3% and the Nasdaq 3.65%. European stocks suffered the worst session in over a year. Rising tensions on the Ukrainian border and concerns over the impact of monetary policy tightening continue to weigh on market sentiment.

Economic data released in the United States was weaker than expected. The preliminary Markit manufacturing PMI for December came in at 55, below the 56.7 expected, while the services PMI fell to 50.8 against estimates of a modest decline to 56.9. Tuesday, the Federal Reserve begins its two-day meeting.

EUR/USD short-term technical outlook

In the short term, the bias is on the downside. Technical indicators offer no clear signs. EUR/SDU continues to move sideways, looking vulnerable.

The pair is under pressure but the rebound from the two-week low it hit at 1.1289 above 1.1300 was a positive development for the Euro. The parity remains in the consolation range, with a negative bias, between 1.1300 and 1.1350. Consolidation below 1.1300 should pave the way for further losses with the first target at 1.1270.

On the upside, the 1.1350 area continues to limit upward moves. The mentioned area is reinforced by the 20-day simple moving average. A break to the upside should boost the outlook for the Euro, especially if the Euro also rallies to 1.1380.

Support Levels: 1.1270 1.1230 1.1180

Resistance levels: 1.1350 1.1385 1.1425

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