- A good recovery in USD demand acted as a headwind for EUR / USD on Monday.
- The slide remains muffled as investors appeared reluctant amid tight liquidity.
The pair EUR/USD it remained on the defensive heading into the early American session, although it has managed to stay above the 1.1300 round level.
Failing to break through the 1.1340-50 resistance zone on Friday, the EUR / USD pair witnessed moderate / in-range price action on the first day of a new week. The rise remains limited amid a good recovery in demand for the US dollar, although weak liquidity at the end of the year helped limit deeper losses.
Recent optimism led by reports that the Omicron variant could be less severe than previously feared was overshadowed by uncertainty about the economic impact of the continued rise in new COVID-19 cases. This, in turn, fueled some safe haven flows to the dollar and acted as a headwind for the EUR / USD pair.
Aside from this, the Fed’s aggressive outlook, indicating at least three rate hikes next year, further sustained the dollar. However, investors seemed reluctant to make aggressive directional bets amid the absence of a relevant fundamental catalyst and fairly quiet trading activity due to the end-of-year holiday season.
Looking at the bigger picture, the EUR / USD has been swinging in a wider trading range since the beginning of this month. This further warrants some caution for aggressive traders and makes it prudent to wait for a convincing breakout through the aforementioned before positioning for a firm short-term direction.
Technical levels
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