EUR/USD price holds narrow 0.5% range ahead of U.S. goods trade balance data
The pair was trading around 1.0410
EUR/USD has been confined to a narrow trading range of 0.5% over the past 5 days, given the absence of trading activities due to the holiday season.
As of Friday’s European trading session, the pair was trading around 1.0410, with minimal movement as volatility remains low. However, a few key developments ranging from US economic data to ECB rate outlook could stir price action in the coming weeks.
EUR/USD price dynamics (November-December 2024). Source: TradingView
The previous week's price action saw EUR/USD drift lower, testing the support near last week's swing low, which is close to the November low of 1.0330. This recent price decline followed a brief recovery to 1.0430, which was met with resistance from a bearish trendline. As of now, the pair’s short-term prospects remain dependent on the direction of the trendline break. Should EUR/USD break upwards, near-term resistance is expected around the 100 EMA, aligning with the 1.0460 critical resistance level. If the pair fails to break above these levels, further downside seems likely, with a target toward the November low.
US labor data and ECB rate outlook shape EUR/USD near-term outlook
Market activity is subdued this week, with many traders on holiday before the New Year, contributing to lower trading volumes. The recent US data on jobless claims showed a drop to 219,000 in the week ending December 21, slightly below the consensus of 224,000, which highlights the strength of the US labor market. Friday’s release of the preliminary US Goods Trade Balance for November could provide some fresh impetus for the pair.
Regarding monetary policy, the Federal Reserve’s signaling of a slower pace of interest rate cuts in 2024 could continue to provide support for the US dollar in the near term. On the other hand, the ECB Governing Council member Boris Vujcic suggested that further rate cuts may be on the horizon if the incoming data supports the bank’s projections. Such a move would likely weigh on the euro, adding further downside risks for EUR/USD.
EUR/USD failed to break above the 1.0400 level after its brief recovery attempt last week. The market's performance has been dampened by the holiday lull, leading to subdued trading volumes.
