The currency pair had a bit of a mixed showing last week, with the early Monday move seeing price climb back above 1.1900 before stalling closer to 1.1920. And since then, the pair has been meandering just under 1.1900 but with not enough momentum to break towards 1.1800.
So, what’s next for EUR/USD?
The technical story shows that the pair is consolidating a little as we get into the new week. That as price action rests in between both the 100 (red line) and 200-hour (blue line) moving averages. That suggests the near-term bias is more neutral for now. The latter is the bigger key technical level as it provides a floor for price action since last week already.
The key level is seen at 1.1853 currently, keeping close to a large set of option expiries for the pair today. As such, that should reinforce a floor of sorts for price action in trading today. That considering a lack of major catalysts on the day and with it being a US holiday.
As such, the next key move this week will have to come on a break on either side of the key near-term levels highlighted. Push back above the 100-hour moving average, and the near-term bias turns more bullish. Fall below the 200-hour moving average, and the near-term bias switches to being more bearish instead. The latter will open the door towards the 1.1800 mark next.
In terms of fundamental factors, the euro side of the equation seems to be more limited. I’m saying that in the sense that everything that we know is already factored into the euro currency already.
The ECB remains on the sidelines with markets not really expecting anything from euro area data in the short-term to change that outlook. Meanwhile, EUR/USD closer to the 1.20 level will keep ECB policymakers on guard and that will also see long positions be more wary.
As such, it’s more of the dollar side of the equation that will do the work in the week ahead. On the data docket, there is the FOMC meeting minutes, US Q4 GDP, PCE price data, and PMI data to work through. That especially since traders are sticking with the de-dollarisation narrative and currency debasement narrative for the most part.
ING is of the view that while the pair may be “overvalued” by their estimates, a softer dollar will continue to keep it underpinned for the time being.
“The short-term fair value of EUR/USD has dropped to 1.165 after the latest hawkish repricing in the USD curve, meaning the overvaluation gap has now widened too
