- EUR/USD attracted some dip-buying near the 1.1300 mark amid subdued USD price action.
- Retreating US bond yields acted as a headwind for the greenback amid easing Omicron fears.
- The recent range-bound moves warrant caution before placing aggressive directional bets.
The EUR/USD pair rallied around 30-35 pips from the early European session low and sho to the 1.1335 region, or a fresh daily high in the last hour.
The US dollar struggle to gain any meaningful traction amid a softer tone surrounding the US Treasury bond yields and remained well within the striking distance of the weekly low touched on Wednesday. This, in turn, was seen as a key factor that assisted the EUR/USD pair to defend and attract fresh buying near the 1.1300 round-figure mark on Friday.
Apart from this, the latest optimism over signs that the Omicron variant might be less severe than feared and is unlikely to derail the economic recovery further undermined the safe-haven greenback. That said, the mixed performance in the equity markets, along with the Fed's hawkish outlook should act as a tailwind for the greenback and cap the EUR/USD pair.
Even from a technical perspective, the pair has been oscillating in a familiar trading range since the beginning of this month. This constituted the formation of a rectangle on the daily chart, which points to indecision among traders. Hence, it will be prudent to wait for a strong follow-through buying before positioning for any further appreciating move.
In the absence of any major market-moving economic releases, either from the Eurozone or the US, the broader market risk sentiment and the US bond yields will influence the USD. This, in turn, might provide some impetus to the EUR/USD pair, though the momentum is likely to be restricted amid thin end-of-year trading volumes on New Year's eve.
Technical levels to watch
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