- The EUR/USD rebounded modestly from the 20-day Simple Moving Average (SMA) after Friday's slide.
- Higher US Treasury yields are limiting the upside in the pair.
- Eurozone's economic calendar for the week is light, while in the US, the key report to watch will be Friday's Core PCE.
The EUR/USD rose modestly on Monday, recovering after Friday's sharp decline. The pair found support above the 20-day Simple Moving Average (SMA) and climbed above 1.0900 on a quiet day in markets, which saw mixed performance for the US Dollar.
The US Dollar continues to face some bearish pressure as market participants reposition themselves following last week's Federal Reserve meeting. The Fed's officials' forecasts of rate cuts put further pressure on the US Dollar. However, comments after the meeting suggested that rate cuts are still far away. A key report in the US is due on Friday with the Core Personal Consumption Expenditures (PCE) Price Index, which is the Fed's preferred inflation gauge.
On Monday, Germany reported a lower-than-expected reading of the IFO business survey. The Eurozone will release the final November inflation reading, which is not expected to bring surprises, with the annual Consumer Price Index at 2.4%. The slowdown in inflation and a deteriorating economic outlook in the Eurozone has increased expectations that the European Central Bank (ECB) may be among the first central banks to start cutting interest rates. This has kept the Euro limited and unable to break above 1.1030 firmly.
EUR/USD short-term technical outlook
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The EUR/USD held above the 20-day SMA and rebounded modestly. Technical indicators on the daily chart are mixed, and while staying below 1.1030, gains appear uncertain. The Euro would need a daily close convincingly above 1.1000 to open the doors to further gains. Conversely, a close below 1.0850 would indicate a bearish extension.
On the 4-hour chart, price is hovering around the 20-SMA. The Relative Strength Index (RSI) and Momentum are flat, offering no clear signals. The MACD favors the downside. There is a mild downward bias as long as the price remains below 1.0930. Immediate support is seen at 1.0885, followed by 1.0850 and then an uptrend line at 1.0840. Above 1.0930, the Euro could rise further towards 1.0960.
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