EUR/USD Price Forecast: Consolidative phase around 1.0500 continues

EUR/USD Current price: 1.0510

• The  December flash PMIs showed the Eurozone still struggles with economic contraction.
• The Federal Reserve will announce its decision on monetary policy next Wednesday.
• EUR/USD is technically neutral, with little scope for a sudden advance.

The EUR/USD pair seesawed around the 1.0500 level for most of this Monday, spending the day in a tight 60 pips range. The pair is currently trading a handful of pips above the level, posting gains for a second consecutive journey, albeit still lacking clear directional signs.

Investors refrained from lifting bets ahead of the upcoming Federal Reserve (Fed) monetary policy announcement, scheduled for next Wednesday. The Fed is widely anticipated to cut the benchmark rate by 25 basis points (bps), but market players aim to take fresh clues from the Summary of Economic Projections (SEP), which will be released right after the announcement. Also relevant will be comments from Chairman Jerome Powell in the following press conference.

Meanwhile, the Hamburg Commercial Bank (HCOB) released the preliminary estimates for the December Purchasing Managers’ Index (PMI) for most major economies. The German report noted that “business activity fell for the sixth month running across Germany’s private sector in December, albeit with the rate of contraction losing some momentum thanks to a slight rebound in services activity.” The manufacturing index printed at 42.5, down from the previous 43, albeit services output bounced from 49.3 in November to 51. The Composite PMI ended at 47.8, slightly better than the previous 47.2.

The Eurozone indexes were slightly better than anticipated, yet the EU Composite PMI resulted at 49.5, better than the previous 48.3, yet still indicating contraction. Finally, the United States (US) S&P Global PMIs came in mixed, as the December Manufacturing PMI contracted to 48.3 from the 49.7 posted in November while missing the expected 49.4. However, the services output improved by more than anticipated, with the index jumping to 58.5 from the previous 56.1, while also resulting much better than the 55.7 forecast.

Tuesday will bring US Retail Sales, foreseen up by 0.5% in November, slightly better than the 0.4% posted in October. The country will also publish November Capacity Utilization and Industrial Production.

EUR/USD short-term technical outlook

The EUR/USD pair keeps trading within familiar level, lacking directional hints. In the daily chart, a mildly bearish 20 Simple Moving Average (SMA) provides intraday resistance at 1.0520. The 100 and 200 SMAs, in the meantime, gain downward traction far above the shorter one, in line with the continued downward pressure. Finally, technical indicators lack directional strength. The Momentum indicator hovers around its 100 line, while the Relative Strength Index (RSI) indicator aims marginally higher at around 42, not enough to anticipate another leg north.

In the near term, and according to the 4-hour chart, EUR/USD is neutral. The pair hovers around converging 20 and 100 SMAs, while the 200 SMA grinds lower above the shorter ones. Meanwhile, technical indicators maintain their modest upward slopes just above their midlines, anyway lacking enough strength to confirm a bullish extension. A break below 1.0460, a static support level, would favor a bearish extension towards the 1.0400/20 price zone.

Support levels: 1.0460 1.0410 1.0375

Resistance levels: 1.0520 1.0570 1.0625