EUR/USD Forecast: Near-term buyers defending the 1.0800 mark

EUR/USD Current Price: 1.0812

• Speculative interest still trying to anticipate US Federal Reserve's next movements.
• Global government bond yields rose in a slow start to the week.
• EUR/USD eases within range but holds well above a critical Fibonacci support level.

The EUR/USD pair hovers around 1.0810 heading into the Asian opening, little changed on Monday as a holiday in the United States kept volume limited. Market players kick-started the week with optimism, which faded as the day unfolded. Following the release of the US Consumer Price Index (CPI) last week, the Euro soared against its American rival, as signs of easing price pressures should lead to a less aggressive Federal Reserve, which in turn should result in a steeper economic comeback.

Wall Street closed last week with substantial gains, although Asian and European markets struggled to follow the lead on Monday. The sentiment soured as government bond yields surged, while speculative interest started doubting whether the US Federal Reserve is ready or not to ease the pace of quantitative tightening. The US Dollar eased amid resurgent bets for high-yielding assets.

European Central Bank officials hold on to the hawkish rhetoric

Across the pond,  European Central Bank (ECB) Governing Council member Olli Rehn said that he sees “significant rate hikes at the next meetings,” in line with hawkish comments from other ECB officials. Meanwhile, news coming from Germany supported the Euro, as the German Economy Minister Robert Habeck noted there are reasons to believe the country will be able to fill gas storage facilities at adequate prices for the 2023/24 winter season.

On the data front, Germany published the December Wholesale Price Index, up 12.8% YoY, easing from the previous 14.9%. On Tuesday, Germany will release the final estimate of the Harmonized Index of Consumer Prices (HICP), expected to be confirmed at 8.6% YoY. Additionally, the country will release the ZEW Survey on Economic Sentiment for January. The United States will return from the long weekend publishing the January NY Empire State Manufacturing Index.

EUR/USD short-term technical outlook

The EUR/USD pair trades above the 1.0800 level and, more relevantly, above the 61.8% retracement of the 2022 decline, a critical support level at 1.0745. Technical indicators eased modestly but remain within positive levels and without clear directional strength. At the same time, the 20 Simple Moving Average (SMA) maintains its upward slope far below the current level and above the longer ones, in line with the dominant bullish trend.

The 4-hour chart shows that near-term buyers are defending the downside at around a bullish 20 SMA, although EUR/USD is barely above the indicator. The longer moving averages, in the meantime, head north, with the 100 SMA currently at around 1.0670. Technical indicators have eased further from overbought readings but turned flat well above their midlines, reflecting limited selling interest.

Support levels: 1.0800 1.0745 1.0695

Resistance levels: 1.0870 1.0910 1.0950

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