I would argue that the pair really did fall short at clearing the final hurdle in trading last week, as noted here on Friday. The dollar held its ground for the most part, as also seen with USD/JPY here in recovering after the setback from the softer US CPI report. But today, the greenback is holding lower and down across the board as we get into European trading.
EUR/USD is up 0.4% to 1.0630 as buyers try to keep a firm break above the key trendline resistance (white line) as well as the 38.2 Fib retracement level of the downswing from January last year, seen at 1.0610. Those two points are still the key levels on the charts to watch out for this week as we move towards the Christmas holiday period.
Thinner liquidity conditions may make for a tougher time to read into the moves but as mentioned earlier, I would weigh up any modest dollar buying/selling against that of equities before drawing much conclusions.
The technicals are still your best friend but really, it never is too wise to be trading too actively once we have moved past the final full-fledged trading week of the year. It's all about the winding down period now and positioning flows and tax-loss selling could exacerbate any decent market movements in the final two weeks.
Looking at the EUR/USD chart, buyers are looking to make a play in search of an upside break again but as we saw last week, it isn't that simple and easy to come by as they fell short of clearing the two key levels highlighted.
