EUR/USD Forecast: Growing fears not enough to knock the EUR

Valeria Bednarik FXStreet

EUR/USD Current Price: 1.0639

New coronavirus-related concerns undermine the market mood in thin trading.
EU November M3 Money Supply rose 4.8% YoY, beating expectations.
EUR/USD is losing upward momentum, but bears are nowhere to be found.

The EUR/USD pair keeps trading within familiar levels on Thursday, bottoming during the Asian session at 1.0605 and peaking during European hours at 1.0657. Trading remains choppy amid a scarce economic calendar and due to the winter holidays in the Northern Hemisphere, although the market sentiment continues to deteriorate. The latest news from China does not seem encouraging as the number of coronavirus cases has multiplied while the government moves away from its zero-covid policy.

Italy reported that roughly 50% of the passengers of two flights arriving in Milan on Wednesday tested positive for COVID-19, and several western nations rushed to impose control on Chinese travellers, fearing a new strain could break the delicate balance in which they are living. It is still to be seen whether these latest developments will have long-lasting effects on growth and inflation. Meanwhile, China’s State Council announced it would adjust import and export tariffs of some goods starting January 1, detailing raising export tariffs on aluminium and aluminium alloys.

On the data front, the EU published November M3 Money Supply, which rose 4.8% YoY, beating expectations. The US will later release Initial Jobless Claims for the week ended December 23.

EUR/USD short-term technical outlook

The EUR/USD pair trades around 1.0640, with the picture unchanged from the previous updates. Technical readings in the daily chart show that the pair has lost upward momentum, although the risk remains skewed to the upside. In the mentioned time frame, the pair develops above all of its moving averages, with a bullish 20 SMA providing dynamic support at around 1.0600. The longer moving averages, in the meantime, lack directional strength far below the shorter one. Finally, technical indicators remain flat, with the Momentum just above its midline but the Relative Strength Index (RSI) holding near overbought readings.

In the near term, and according to the 4-hour chart, the pair retains the neutral stance. EUR/USD develops above a mildly bullish 20 SMA, while the 100 SMA heads nowhere below it. The 200 SMA, however, maintains its bullish slope far below the latter. Technical indicators have turned south but lack enough strength and are stuck to their midlines, reflecting the absence of speculative interest.

Support levels: 1.0610 1.0580 1.0535

Resistance levels: 1.0660 1.0695 1.0740

View Live Chart for the EUR/USD

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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