- EUR/USD has gone into consolidation following Friday's retreat.
- Market action is likely to remain subdued on the MLK Day holiday.
- Technical correction could extend in case the pair fails to hold above 1.1400.
EUR/USD has lost traction after climbing to its highest level in more than two months at 1.1482 on Friday and erased a small portion of its weekly gains. The pair is trading in a relatively tight range on Monday and the near-term technical outlook doesn't offer any developments that could be taken as a directional clue.
Bond and stock markets in the US will be closed due to the Martin Luther King Jr. Day holiday on Monday and markets are likely to remain quiet.
Rising US Treasury bond yields ahead of the weekend helped the greenback find demand and the US Dollar Index staged a modest rebound. The benchmark 10-year US Treasury bond yield rose nearly 5% on cautious comments from Fed officials on the inflation outlook, registering gains for the fourth straight week.
New York Fed President John Williams said that he was expecting the Omicron wave to temporarily prolong supply chain bottlenecks. On a similar note, San Francisco Fed President Mary Daly argued that Omicron would extend the time period that inflation will remain high. "Slowing the economy a little bit with rate hikes will help bring demand down into better line with supply," Daly added.
With the Fed having gone into the blackout period ahead of next week's FOMC policy meeting, investors could remain on the sidelines while trying to figure out the timing of the Fed's first rate hike and the balance sheet reduction.
EUR/USD Technical Analysis
On the four-hour chart, the Relative Strength Index (RSI) indicator has retreated to 50, mirroring the pair's indecisiveness in the near term. On a bullish note, the ascending trend line coming from January 6 remains intact, suggesting that the latest pullback was a technical correction rather than a reversal.
On the downside, the first support aligns at 1.1400 (ascending trend line, psychological level). In case a four hour candle closes below that level, the correction could extend toward 1.1380 (static level) and 1.1350 (100-period SMA).
Resistances are located at 1.1430 (20-period SMA), 1.1450 (static level) and 1.1480 (two-month high set last week).
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
AUD/USD posts modest gains above 0.6450 despite stronger US Dollar, eyes on RBA Meeting Minutes
The AUD/USD pair trades on a stronger note around 0.6460 during the early Asian session on Monday. However, the upside for the pair might be limited amid the cautious remarks from the Federal Reserve (Fed) officials and strong US economic data, which boost the US Dollar (USD) broadly.
Japanese Yen holds gains as US Dollar loses ground ahead of Retail Sales
The Japanese Yen appreciates as the US Dollar corrects downwards ahead of Retail Sales data. Japan’s GDP annualized growth for Q3 was 0.9%, slowing down from the 2.2% growth recorded in Q2. Japan’s Kato stated that he would take appropriate action to address excessive fluctuations in foreign exchange rates.
Gold marks sixth-day of losses on Powell’s slightly hawkish rhetoric
Gold prices extended their losses for the sixth straight day, set to achieve weekly losses of over 4%, the largest since September 2023. Federal Reserve Chair Jerome Powell's slight “hawkish” rhetoric lifted the Greenback, denting appetite for the golden metal. At the time of writing, XAU/USD trades at $2,564, down by 0.17%.
Could a Solana ETF debut in 2025? Expert weighs in
Solana (SOL) made the rounds across crypto communities on Friday as key executives from VanEck and BlackRock gave contrasting views on the possibility of a SOL exchange-traded fund (ETF) launching in the US.
Week ahead: Preliminary November PMIs to catch the market’s attention
With the dust from the US elections slowly settling down, the week is about to reach its end and we have a look at what next week’s calendar has in store for the markets. On the monetary front, a number of policymakers from various central banks are scheduled to speak.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.