The currency pair had a bit of a mixed performance last week, with the price rising above 1.1900 early on Monday and then stalling near 1.1920. After that, a warmer than expected US jobs report here sent the pair back below the figures level. And since then, the pair has been trading below 1.1900, but there is not enough momentum to move towards 1.1800.
So, what’s next for EUR/USD?
EUR/USD hourly chart
The technical story shows that the pair is strengthening slightly as we enter the new week. As price action rests between both the 100 (red line) and 200-hour (blue line) moving averages. This suggests that the near-term bias is more neutral at the moment. The latter is a huge key technical level as it provides a base for the price action from last week.
The key level is currently seen at 1.1853, which is close to a large set of options expirations for the pair today. Thus, it should reinforce a basis of sorts for price action in today’s trading. Given the lack of major catalysts on that day and it being a holiday in the US.
Thus, the next major move this week would be to break either side of the highlighted key near-term levels. Back above the 100-hour moving average, the near-term bias turns more bullish. Break below the 200-hour moving average, and the near-term bias turns more bearish instead. The latter will open the door towards the next 1.1800 points.
In terms of fundamental factors, the euro side of the equation appears to be more limited. I say this in the sense that everything we know is already included in the euro currency.
The ECB remains on the sidelines as the market is not expecting any euro zone data to change that outlook in the short term. Meanwhile, EUR/USD near the 1.20 level will keep ECB policymakers cautious and long positions even more cautious.
Thus, it is the dollar side of the equation that will come into play in the coming week. On the data docket, there is FOMC meeting minutes, US Q4 GDP, PCE price data and PMI data to work through. But beyond that, there are two other key risk events worth noting.
Meanwhile, amid a generally sluggish start to the New Year, the dollar and its vulnerabilities continue to grow in size in the market. Especially when traders are stuck on the de-dollarization narrative and currency weakening narrative for the most part.
ING’s view is that while the pair may be “overvalued” in their estimation, a soft dollar will continue to support it for now.
“The short-term fair value of EUR/USD has fallen to 1.165 following the latest sharp revaluation in the USD curve, meaning the overvaluation gap has also now widened. In line with our USD approach, we are reluctant to fully fill that gap, even if some downside risks to the pair remain.”
