EUR/USD Forecast: Rejected from above 1.2200, eyes critical support

EUR/USD spike falters above 1.2200 and turns lower.
The short-term technical picture turns slightly bearish, with critical support seen at 1.2130.

Valeria Bednarik FXStreet

The EUR/USD pair came under pressure early during the European session and reversed most of its Tuesday’s gains after being rejected by a high of 1.2222. The pair fell to a low of 1.2139 during the New York session as the greenback strengthened broadly. Market’s attention remains on Covid-19 updates and US politics as the House of Representatives is set to vote on impeaching President Donald Trump, one week before he is scheduled to leave office.

On the data front, the Consumer Price Index rose at a monthly pace of 0.4% in December, matching investors’ expectations, while excluding food and energy costs prices rose at a meager 0.1% from a month earlier. The CPI rose by 1.4% YoY in December, beating expectations of a 1.3% advance, although still well below the Fed’s 2% target. The core CPI climb was somewhat steeper, recording a 1.6% rise YoY, in line with forecasts. Additionally, the Fed released its Beige Book on Wednesday which showed increasing economic activity across most districts, although employment rose at a slower pace.

On Thursday, President-elect Joe Biden and Federal Reserve Chairman Jerome Powell are scheduled to speak, while US jobless claims data will be released, all of which will be looked by investors upon for fresh catalysts.

EUR/USD short-term technical outlook

From a technical view, the EUR/USD pair trades with a neutral-to-slightly-bearish tone according to 4-hour indicators, while price develops below its main moving averages. The euro-dollar has fallen below the 200 SMA as it trades near daily lows at 1.2155. However, the broader picture remains bullish, although the pair is losing upward potential. Loss of the crucial support level at the 1.2130 area, where the January 11 and December 21 lows converge, could add further pressure and push the EUR/USD to the 1.2100 psychological level. On the other hand, immediate resistance is seen at the daily high at the 1.2220-25 area, which is reinforced by the 20-day SMA.

Support levels: 1.2130 1.2100 1.2080

Resistance levels: 1.2220 1.2285 1.2300

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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