EUR/USD Forecast: Bullish bias intact as trading volume thins out

EUR/USD is moving sideways in a tight channel above 1.0400.
The bullish bias stays intact according to the short-term technical picture.
Markets are likely to remain quiet ahead of the weekend.

Eren Sengezer FXStreet

EUR/USD has extended its sideways going above 1.0400 early Friday after having failed to make a decisive move in either direction on Thursday. The trading volumes remain thin on Black Friday and the pair could find it hard to break out of its tight trading channel ahead of the weekend.

The accounts of the European Central Bank's (ECB) October policy meeting revealed on Thursday that a few members of the Governing Council preferred a 50 basis points (bps) rate hike. Additionally, the publication showed that the ECB could consider pausing policy tightening if there was a "prolonged and deep recession."

Meanwhile, "incoming data so far suggest that the room for slowing down the pace of interest rate adjustments remains limited." said ECB Governing Council member Isabel Schnabel. With financial markets in the US enjoying the Thanksgiving Day holiday, however, ECB headlines failed to trigger a noticeable market reaction on Thursday.

Bond and stock markets in the US will open at the usual time but close early on Friday. Since the economic calendar will not be featuring any high-tier macroeconomic data releases either, EUR/USD is likely to move up and down in a narrow range ahead of the weekend. Although profit-taking and week-end flows toward the London fix could cause the volatility to increase, it would be surprising to see the pair gather enough momentum to make a directional move.

EUR/USD Technical Analysis

Following Thursday's limited action, the Relative Strength Index (RSI) indicator on the four-hour chart declined toward 60, suggesting EUR/USD made a downward correction following Wednesday's upsurge. Additionally, the pair holds comfortably above the ascending trend line coming from early November, the 20-period Simple Moving Average (SMA) and the 50-period SMA.

On the upside, 1.0450 (static level) aligns as first resistance before 1.0500 (psychological level, static level) and 1.0530 (static level).

Supports are located at 1.0400 (psychological level, 1.0350 (20-period SMA, 50-period SMA, ascending trend line) and 1.0300 (psychological level, static level).

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Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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