EUR/USD attacks 1.0690s on risk aversion, ECB’s hawkish comments

The EUR/USD advances modestly in the last trading day of 2022, during the North American session, though above its opening price by 0.13%. A light economic calendar keeps the EUR/USD pair within familiar ranges ahead of the week, month, quarter, and year-end. At the time of writing, the EUR/USD is trading at 1.0695.

Wall Street is set to open lower as US equity futures tumble with no fundamental catalyst. The US economic calendar is light, with the release of Chicago’s Purchasing Managers Index for December at 44.9, beating an estimate of 40. Thursday’s release of unemployment claims exerted downward pressure on the US Dollar (USD), weakening against most of the G7 currencies.

The US Dollar Index (DXY), a measure of the buck’s value against a basket of currencies, drops 0.33%, down to 103.634. Even though the greenback is falling, the US 10-year Treasury bond yield is rising five bps, at 3.869%.

Aside from this, the European economic docket revealed that inflation in Spain dropped for the fifth consecutive month, to 5.6% YoY, below November’s 6.7% reading. However, due to thin liquidity trading conditions and 2023 around the corner, it failed to trigger any upside reaction that could break the EUR/USD 1.0600-90 trading range.

Of late, ECB’s Stournaras said that rates should be restricted sufficiently, lifting the pair towards 1.0700, before erasing those gains.

Meanwhile, on geopolitics, Russia and China continue to deepen their ties, as Russian President Vladimir Putin and China’s Xi Jinping videoconference showed intentions for further cooperation between both countries on trade, energy, finance, and agriculture.

Furthermore, Russia’s invasion of Ukraine continued during new year’s eve, as the fourth wave of drones attacked civilian buildings, as reported by Ukrainian authorities. Shelling continued in Kiyv and Kharkiv, killing at least two people.

EUR/USD Price Analysis: Technical outlook

From a technical perspective, the EUR/USD is still upward biased. Nevertheless, the inability to decisively crack the 1.0700 mark would expose the pair to selling pressure. Oscillators like the Relative Strength Index (RSI) and the Rate of Change (RoC) favor EUR/USD upside, but low volumes keep traders at bay.

However, the EUR/USD key resistance levels lie at 1.0700, followed by the December 15 daily high of 1.0736 and 1.0800. On the other hand, if the EUR/USD drops below 1.0638, a test of 1.0600 is on the cards, followed by the 20-day Exponential Moving Average (EMA) at 1.0575.