EUR/USD Vulnerable Amid Push Below January Opening Range

US Dollar Outlook: EUR/USD

EUR/USD extends the rebound from the monthly low (1.0178) to keep the Relative Strength Index (RSI) above 30, but the exchange rate may continue to track the negative slope in the 50-Day SMA (1.0495) as it pushes below the opening range for January.

EUR/USD Vulnerable Amid Push Below January Opening Range

EUR/USD attempts to retrace the decline following the 256K rise in US Non-Farm Payrolls (NFP) as it snaps the recent series of lower highs and lows, and the RSI may show the bearish momentum abating should it move away from oversold territory.

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However, the rebound in EUR/USD may turn out to be temporary as positive data prints coming out of the US raises the Federal Reserve’s scope to pause its rate-cutting cycle, and the update to the Consumer Price Index (CPI) may sway the exchange rate as the report is anticipated to show sticky inflation.

US Economic Calendar

The headline CPI is expected to increase to 2.9% in December from 2.7% per annum the month prior, while the core rate of inflation is seen holding steady at 3.3% during the same period.

Signs of persistent price growth may generate a bullish reaction in the US Dollar as it puts pressure on the Fed to further combat inflation, but a softer-than-expected CPI print may fuel the recent rebound in EUR/USD as it boosts speculation for lower US interest rates.

With that said, EUR/USD may further retrace the decline from the monthly high (1.0437) as it no longer reflects a bearish price series, but the exchange rate may may continue to track the negative slope in the 50-Day SMA (1.0495) as it still holds below the moving average.

EUR/USD Chart – Daily

Chart Prepared by David Song, Senior Strategist; EUR/USD on TradingView

• EUR/USD snaps the series of lower highs and lows carried over from last week amid the failed attempt to close below 1.0200 (23.6% Fibonacci retracement), with a move back above 1.0370 (38.2% Fibonacci extension) bringing the monthly high (1.0437) on the radar.
• Need a break/close above the 1.0448 (2023 low) to 1.0480 (100% Fibonacci extension) zone for EUR/USD to threaten the negative slope in the 50-Day SMA (1.0495), but the exchange rate may continue to hold below the moving average should it fail to test the monthly high (1.0437).
• A close below 1.0200 (23.6% Fibonacci retracement) may push EUR/USD towards parity, with the next area of interest coming in around 0.9950 (50% Fibonacci extension).

Additional Market Outlooks

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--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong