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Volatility eases ahead of Christmas

The EURUSD pair rose 0.07% to 1.1286 on Tuesday, December 21. Price action climbed to 1.1303 at the outset of the European trading session. Buying activity picked up amid growth in Asian and European stock indices. These gains were short-lived, as selling of the single currency in the EURGBP pair followed. As a result, EURUSD decreased ahead of the North American session, while GBPUSD increased. Also, the strengthening of the euro was capped by falling 10-year bond yields.

Today’s macro agenda (GMT+3)

  • 16:30 US: GDP (Q3)
  • 17:00 Switzerland: SNB quarterly report
  • 18:00 US: CB consumer confidence (December), existing home sales (November)
  • 18:30 US: EIA petroleum status report (week ended December 17)

Current outlook

By the time of writing, major currencies were trading in the red. The biggest losses were seen in the aussie (-0.32%) and the kiwi (-0.27%). Antipodean currencies reverted to a correction after yesterday's gains. Investors remain worried about the potential economic impact from the rapid spread of the Omicron variant.

The economic calendar looks thin this week as market participants cash out ahead of the Christmas holidays. US index futures are flatlining near Tuesday's close. Equities are expected to continue recovering unless more negativity about Omicron rolls in.

Technical analysis

The EURUSD pair is trading near the 55-day SMA (balance line). Price action found support around 1.1264. The external backdrop for the single currency is relatively low-key. An ambiguous situation has shaped up in the EURGBP cross pair. If the cross begins to recover from yesterday's gains, EURUSD will draw support.

The key pair could continue to trade sideways in the range of 1.1257-1.1290 until the North American session. The faster the price recovers to 1.1290, the higher the odds of continued growth to 1.1330. If the single comes under pressure from euro crosses, we expect to see a drop to 1.1234 amid overall strengthening of the dollar.

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