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  • The EUR/USD gained some support as risk dynamics undermined the safe-haven status of the US dollar.
  • Because of the Fed’s hawkish outlook, the dollar enjoyed a tailwind, and growth in the pair was limited.
  • Due to the lack of relevant business news, some caution is required before placing new directional bets.

The EUR/USD price analysis shows a rebound at the start of the European session and hit new highs in the last hour. However, it struggled to capitalize on the move or trackback at the 1.1300 level.

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The EUR/USD pair gained momentum for the second consecutive day on Tuesday amid lower demand for the US dollar. Risk sentiment has shifted in the equity markets, undermining the dollar’s status as a relatively safe haven. In turn, this was seen as a major contributor to a moderate increase in the major.

The Fed’s restrictive outlook combined with rising US Treasury yields has given the dollar a tailwind and limited the upside potential for the EUR/USD pair. Remember that the Fed announced last week that it would double the rate of contraction to $30 billion a month. Furthermore, the scatter plot shows that officials expect the key rate to triple in the next year.

However, investors remain concerned about the potential economic impact of the rapid spread of the Omicron variant of Coronavirus. Moreover, a fatal blow to the $1.75 trillion in social spending and US President Joe Biden’s climate protection law should dampen further market optimism. This could further enhance the dollar’s reputation as a relatively safe haven compared to its European counterparts.

The relative lack of liquidity may discourage investors from betting aggressively ahead of the New Year holidays. As a result, there needs to be some caution with bullish traders or positioning against a solid short-term rate due to the lack of relevant economic news influencing the market from either the Eurozone or the US.

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EUR/USD price technical analysis: Bulls trying for a breakout

eur/usd price analysis

The EURUSD price remains stuck around the 1.1300 handle and the 20-period SMA on the 4-hour chart. The pair has moved only 39% average daily range so far, which indicates a lack of volatility. However, the upside bias looks to hold more weight. Further resistance can be seen around 1.1330 ahead of 1.1380.

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