EUR/USD is caught in a bit of a push and pull at the moment
For one, the dollar is firmer amid risk aversion in the market and that is helping to keep downside pressure in the pair this week.
Adding to that is constant verbal intervention by the ECB as of late to limit euro gains and that now sees limited upside potential for the pair, if the central bank sticks to their word of watching developments in the euro rather closely.
That said, any major push to the downside still requires sellers to break through key technical support as seen from the daily chart above.
The fall yesterday tested support from the 9 December low @ 1.2059 as well as the 38.2 retracement level @ 1.2064, before bouncing a little.
That remains the key line in the sand limiting a potential downside break in the pair towards 1.2000 and a possible test of its 100-day moving average (red line) @ 1.1955.
Looking at the near-term chart:
Price action suggests that sellers are in near-term control now, keeping below the key hourly moving averages @ 1.2132-44. That is the area in which buyers will have to break back above in order to reestablish any turnaround in near-term sentiment.
As such, the pair is very much caught in a push and pull between key support around 1.2059-64 and near-term resistance around 1.2132-44 for the time being.
In the bigger picture of things, the recent verbal intervention by the ECB isn't anything that they haven't done before in years past (think back to late 2017 and early 2018).
In fact, price action back then is also reflecting something similar to what we're seeing currently. But put aside the uncanniness, perhaps the upper bound range for EUR/USD right now is somewhere in between 1.2000 to 1.2500.
It would be tough to see the pair breach 1.2500 considering the jawboning by the ECB, unless the dollar capitulates in spectacular fashion.
In that lieu, that will require the market to be overly responsive to the Fed put once again - which it is starting to look more complacent about to start the new year.
