EUR/USD Analysis: December 22 – Choppy Trading Continues Within Holiday Range
Original Article by: Kenny Fisher, MENAFN
The EUR/USD currency pair has continued to exhibit choppy, sideways trading action, primarily driven by the low-volume environment typical of the holiday period. As traders wind down for the year, the pair remains range-bound and highly sensitive to market sentiment, along with any surprise data releases or political headlines. In this extended analysis, we take a closer look at the market dynamics, technical indicators, and macroeconomic drivers influencing the euro-dollar exchange rate.
Overview of Current Market Conditions
– EUR/USD continues to fluctuate within a narrow range, typical of holiday trading.
– There has been a notable absence of significant market-moving economic data releases.
– With trading volumes thinning ahead of the Christmas and New Year holidays, liquidity has declined.
– Risk sentiment has oscillated in light of Covid-19 developments, Brexit uncertainty, and comments from central bank officials.
– The pair has seen occasional intraday volatility but has largely remained stuck in a sideways pattern.
Trading Activity Recap
The euro-dollar pair has seen minor daily fluctuations but lacks directional conviction. This indecision is largely a function of weak volume and limited market catalysts. The main drivers contributing to this subdued behavior include:
– Market participants reducing exposure ahead of year-end.
– Traders awaiting clarity on global vaccination rollouts and potential lockdown extensions.
– Limited new data flow from the Eurozone and the United States.
– Brexit trade negotiations continuing to see mixed signals and delays.
At present, EUR/USD is hovering around the 1.2150 level, having struggled to break through recent highs. Dips below 1.2100 have typically reversed as buyers enter near strong support zones. However, upward momentum also faces resistance with limited buying interest above key levels near 1.2200.
Technical Outlook
From a technical standpoint, EUR/USD remains in a consolidation phase following a strong bullish run earlier. The overall bullish trend remains intact on the higher timeframes, but in the short term, the pair shows signs of fatigue. Below is a breakdown of key technical considerations.
Support and Resistance Levels:
– Immediate support: Around 1.2120 – 1.2100 zone
– Next support: Near 1.2050
– Resistance: First ceiling near 1.2180 – 1.2200
– Extended resistance: Just above 1.2250, recent multi-year high
Indicators and Chart Patterns:
– Moving Averages: The pair continues to trade above its 50-day and 100-day moving averages, signaling the overall trend remains upward.
– Relative Strength Index (RSI): RSI on the daily chart is hovering near the neutral 50 level, suggesting neither overbought nor oversold territory.
– MACD: The Moving Average Convergence Divergence line is flattening, reinforcing the consolidation theme.
– Candlestick patterns: Price action has shown frequent rejections near highs of the range, with upper wicks forming at resistance levels.
Near-term price action is expected to continue reflecting lackluster movement unless triggered by headline catalysts. The technical scenario fits a textbook holiday range-bound profile.
Fundamental Drivers
Several fundamental themes are currently influencing EUR/USD behavior. These include short-term price pressures and long-term macroeconomic considerations.
1. Covid-19 Pandemic Developments:
– The resurgence of Covid-19 cases in Europe and the U.S. continues to weigh on investor confidence.
– New, more contagious variants of the virus have led to renewed lockdowns, particularly in the U.K. and parts of the Eurozone.
– Vaccine rollout progress has been a source of optimism, but logistical hurdles remain, with inconsistencies among member nations.
2. Brexit Negotiations:
– The U.K. and European Union remain locked in difficult last-minute trade talks.
– Despite optimism and intermittent progress, continually shifting deadlines and sticking points on fisheries and level playing field rules keep
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