- EUR/USD is trading within a range as the year draws to a close, currently just above 1.0400.
- ECB officials are cautious about potential rate cuts due to a weak Euro.
- The US Dollar Index (DXY) maintained last week’s gains, buoyed by favorable US economic data.
Last week ended on a positive note for the market despite a rise in the (DXY). The currency pair traded within a narrow 60-pip range as low liquidity prevented any major fluctuations.
This morning, EUR/USD has continued to trade just above 1.0400. Market conditions remain volatile with the New Year holiday approaching. For now, the situation remains unchanged, keeping EUR/USD within last week’s range.
Currency Strength Chart: From Strongest to Weakest – NZD, AUD, CAD, CHF, GBP, EUR, USD, JPY
Source: FinancialJuice
ECB Officials Exercise Caution
Recent comments from ECB policymakers reflect a cautious stance regarding economic developments as we approach 2025. The sluggish economy of the Euro Area and potential tariff risks have prompted significant deliberation among officials.
This cautious posture was reiterated over the weekend. In an interview with the Austrian publication Kurier, Robert Holzmann, a member of the European Central Bank’s Governing Council, suggested that it may be some time before the ECB considers lowering rates again. He pointed out that while some energy prices are increasing, inflation could also rise if the euro weakens further.
Such remarks could bolster the Euro’s strength, potentially capping any downside risk for EUR/USD and maintaining its range-bound movement.
US Dollar Index (DXY)
Last week, the US Dollar Index retained its gains as market liquidity declined. Positive US data helped support the index, while concerns over rising rates and Treasury yields kept the dollar strong.
Later today, the US economic calendar will include data for November and December.
Given the scarcity of liquidity, the data’s impact on market outlook may be minimal moving forward.
DXY Daily Chart – December 30, 2024
Source: TradingView.com
Technical Analysis of EUR/USD
Since the FOMC-triggered selloff on December 18, EUR/USD has struggled to find direction. The pair has made attempts to climb back toward the 1.0500 level but faces persistent selling pressure.
Last week’s price dynamics saw EUR/USD confined to a 60-pip range between 1.0440 and 1.0380. A breakout from this range is essential to provide clarity on future movement.
This week mirrors last week’s trading environment with the New Year holiday likely impacting liquidity further. The key question remains whether we will see another week of range-bound activity or a breakout.
Immediate support is found at 1.0400, while last week’s lows around 1.0380 are also significant.
On the upside, immediate resistance is at 1.0440, and key focus will be on the 1.0500 level. A break above this could signal a change in trend, potentially placing bulls in a stronger position.
EUR/USD Daily Chart – December 30, 2024
Source: TradingView.com
Support
Resistance
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