- EUR / USD is stuck in a range below 1.1600 as the US dollar tries to rebound.
- Bad NFP pushes EUR / USD higher, but firmer US Treasury yields will keep the decline intact.
- EUR / USD expects sustained move above 50-SMA while defending 21-SMA support.
EUR / USD shows small gains while consolidating in a narrow range below 1.1600 as the rebound in the US dollar appears to have limited the upside.
The greenback follows US Treasury yields higher amid rising inflation and energy prices, strengthening the case for a Fed cut. Meanwhile, the European Central Bank (ECB) said it was studying a new bond-buying plan for the end of the crisis tool.
The divergence in monetary policy between the Fed and the ECB will continue to undermine the euro and therefore any attempt to rally the major currency pair could only be seen as temporary.
At the time of writing, EUR / USD was trading up 0.07% on the day at 1.1573 in thinned market conditions during the holidays.
From a short-term technical perspective, the major currency pair is moving within a range, with the upside capped by the 50-Simple Bearish Moving Average (SMA) at 1.1584 on the four-hour chart.
Meanwhile, the decline remains dampened by the downward slope 21-SMA at 1.1562.
The Relative Strength Index (RSI) is slightly higher but remains just below the midline, justifying the caution of bullish traders.
EUR / USD: Daily chart
A sustained break below the 21-DMA will call back sellers, exposing annual lows of 1.1529. Further south, the 1.1500 level will be tested if selling pressure intensifies.
Alternatively, any significant recovery will only start after acceptance above the 50-SMA level. The bulls will aim for the October 4th highs at 1.1640 if the 1.1600 level is broken decisively.