EUR/USD Forecast: Cautiously optimistic buyers take the lead

EUR/USD Current price: 1.0804

• Market players await a fresh directional catalyst after central banks' frenzy.
• A scarce macroeconomic calendar adds to the absence of fresh clues.
• EUR/USD struggles to extend gains beyond 1.0800 but bulls not giving up.

The EUR/USD pair reached a fresh three-week high of 1.0809 mid-European session, as the US Dollar retained its broad weakness. Demand for the Euro, however, remains subdued, with the pair still confined to a well-limited intraday range.

Speculative interest struggles to find directional clues after understanding central banks will take time to loosen the monetary policy. Global policymakers have entered a wait-and-see stance regarding monetary policy, although the reasons behind the decisions differ. On the one hand, the European Central Bank (ECB) paused tightening amid increased recessionary risks. The latest macroeconomic data somehow confirms the downturn in the Eurozone is still far from over. The ECB should hike rates further, but the economy won't stand it.

On the other hand, the Federal Reserve (Fed) also stayed pat amid concerns that excessive tightening could affect growth. The big difference is that the United States' (US) economy proved to be in much better shape than the EU's, giving the Fed more time to assess its latest measures without risking economic progress.

At the end of the day, both central banks did a good job cooling the market's expectations, leaving speculative interest clueless about the next significant catalyst. A strong US labor market and an uptick in the country's inflation in January surely add to the overall uncertainty.

Meanwhile, the macroeconomic calendar has little to offer on Tuesday. The EU released the December Current Account, which posted a seasonally adjusted surplus of €31.9 billion, improving from the previous €22.5 billion. Additionally, Construction Output in the same period rose 0.8% MoM, up from 0.4% in November. The US will publish minor figures, including the Redbook Index and weekly crude oil stocks data.

EUR/USD short-term technical outlook

The daily chart for the EUR/USD pair shows buying interest reappeared, but it is still tepid. Technical indicators in the daily chart aim north but remain below their midlines and need to surpass them with momentum to confirm another leg north. At the same time, the pair is battling to overcome the 20 and 100 SMAs, both converging around the 1.0795 level. Finally, a flat 200 SMA provides resistance at around 1.0825.

The 4-hour chart shows buyers defend the downside around a bullish 20 Simple Moving Average (SMA), currently at around 1.0770, while EUR/USD extended its advance above a still bearish 100 SMA. Technical indicators aim higher within positive levels, partially losing their early strength but still heading north. Bulls will likely insist if the pair breaches the aforementioned 1.0825 level, aiming to extend the rally towards the 1.0860 area.

Support levels: 1.0770 1.0740 1.0695  

Resistance levels: 1.0825 1.0860 1.0905