EUR/USD keeps lower to start the week as the dollar holds firmer
The dollar is looking to post three straight days of gains against the euro for the first time in over a month, as we see a continued retreat in EUR/USD after having hit highs last seen since April 2018 last week.
Looking at EUR/USD, the retreat now moves towards a test of the 23.6 retracement level of the rally since November @ 1.2173. That is the first key minor support level to watch before moving towards the 21 December low @ 1.2130.
Going to the near-term chart:
Sellers have now seized near-term control in the pair upon a break below the key hourly moving averages towards the latter stages of trading last week.
Since then, they have leaned on both the 100-hour moving average (red line) and the 200-hour moving average (blue line) to keep the downside pressure going.
That is resulting in the test of support @ 1.2173 pointed out above before a mild bounce.
So, what’s next for the pair?
The market is going to have to do some soul-searching in the next few sessions to try and figure out how much of the dollar strength here is warranted and sustainable.
The breakout in yields is encouraging and from a technical and positioning perspective, a pullback isn’t entirely out of the question either.
However, have things changed in terms of the fundamentals? I’m still not convinced.
For EUR/USD, the pair is largely within the realms of roaming between 1.2000 to 1.2500 to start the new year. As long as the lower bound holds and the Fed put is still in play, the path of least resistance for the pair remains for a move higher in my view.
But that doesn’t rule out the potential for some short-term pain for the time being.