EUR/USD Forecast: stuck in range, waiting for ECB

German ZEW survey showed continued improvement in sentiment in the Union.
US government shutdown came to an end, funding granted for the next three weeks.

Valeria Bednarik FXStreet

The EUR/USD pair is still waiting for a catalyst, trading between 1.22 and 1.23. The greenback got a modest lift by the end of the US session Monday, on headlines indicating that the US Government shutdown came to an end after three days. The US Senate reached a deal, reinstating funding until February 8th on promises to Democrats over DACA. That said, is clear that the issue is far from solved and that Trump's ability to govern, despite having a majority in the Houses, is under fire, giving little hopes for a strong dollar's appreciation.

The EUR/USD pair fell to 1.2222 early Europe but quickly returned to the 1.2240 price zone ahead of the release of the German ZEW report. The index on economic sentiment for the country jumped to 20.4 in January, above the previous 17.4 or the expected 17.8, while the assessment of the current situation was also much better than expected, up to 95.2 vs. the 89.8 forecasted. For the EU, the economic sentiment index reached 31.8, beating the expected 29.7. The figures helped the EUR/USD pair to add some pips but remains trading uneventfully between the mentioned levels. The US will release the Richmond Fed Manufacturing index for January, while Fed's Evans will speak in the American afternoon. Also pending of release is the EU preliminary January Consumer Confidence Index.

Technically, the short-term neutral stance persists, with the price hovering around a horizontal 20 SMA in the 4 hours chart, where technical indicators head marginally lower, but around their mid-lines, lacking clear directional strength. The pair needs to surpass 1.2280 to attempt a retest of the multi-year high of 1.2322, while it would take a break below 1.2200 for the slide to extend towards 1.2165. A break of the extremes seems unlikely today, as investors will likely wait for the ECB's announcement next Thursday before taking a clearer position.

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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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