The euro extended its losses and closed below the 200MA against the US dollar. The common currency remains in a range trading since early December, hinting a substantial consolidation. The nearest support from the current level is located between 1.1065-1.1050 levels. On the upside, 1.1200 and 1.1240 are the key resistance levels to watch out.

Traders are advised to stick to last week’s forecast “The common currency set to consolidate and do not see any significant trend change the week ahead.” For the week, we expect EURUSD to trade in the range of 1.1250-1.1050 with positive bias.

Turning to the latest FX positioning data Danske Bank and Westpac cited broad-based USD selling.

Danske Bank‘s IMM Positioning report says “Investors heavily reduce aggregate USD longs”

Westpac‘s G10 FX model also reported the same “The model starts the year in a bearish mood on the US”

Data review:

Euro area annual inflation is expected to be 1.3% in December 2019, up from 1.0% in November according to a flash estimate from Eurostat.

The latest PMI data suggest that confidence about the future improved during December to its highest level since May though remained well below par.

According to the official data, The IHS Markit Eurozone PMI Services Business Activity Index improved in December to a four-month high of 52.8, up from 51.9 in November.

Data preview: From a data point perspective, we have only one event from the European market, which is ECB minutes in December. Besides, traders keep their focus on the signing of the trade deal between US-China.  

TECHNICAL OVERVIEW

The common currency has depreciated despite the dollar weakness. This indicates a lack of a market driver for the euro, which we think is a US-China trade deal. The initial sign between US-China partial trade deal suggests CNH should remain stronger. Besides, the latest positioning data indicated a broad USD downside risk hence supporting EURUSD.

Last week the EURUSD was managed to hold the 50MA and is currently trading at 1.1120. Further depreciation can take the price to 1.1050 its lower end of the current range.

For the week, we remain tactically neutral on EURUSD and also expect to trade in the range of 1.1250-1.1050 with positive bias (rebound).

As long as 1.0960 supports, we look to buy EURSUD on dips.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

What is your Technical View?

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