December provided EUR/USD traders with a rather difficult track if they were not prepared with solid risk management. The first two weeks of the month delivered a test of emotional fortitude for EUR/USD speculators, particularly if they had bullish sentiment. Trading started in a hectic manner as a late November selloff produced a low of nearly 1.08300 on the 1st of December, only to see a brief run higher going into the weekend. And early December trading then stayed choppy, as additional lows were produced which certainly tested the fortitude of day traders.
December lows were seen on the 8th when the 1.07250 vicinity was briefly touched. By the 13th of December, the EUR/USD was still fighting below the 1.0800 level, but this occurred shortly before the U.S Federal Reserve stepped into the limelight and essentially provided financial institutions with a change of rhetoric. The Fed’s aggressive hawkish stance was brushed away, as the U.S. central bank confirmed they had reached the end of interest rate hikes, and opened the door wide for the potential of rate cuts starting in the spring of 2024.
The EUR/USD Ignited Higher as Sentiment Shifted
On the 14th of December, the EUR/USD was trading near a high of 1.10100 momentarily. Choppy trading developed after this quick rise higher. Price velocity was fast as the EUR/USD had climbed, and the week of trading that followed until the 21st was full of reversals. And then fundamental impetus struck Forex again when U.S inflation data came in weaker than expected, which set off more buying of the EUR/USD and a test of the 1.10400 ratio on the 22nd of December.
Intriguingly as January gets ready to start the EUR/USD is close to the same marks it finished with on the 21st of December. Last week’s holiday trading produced a high of nearly 1.11415 this past Thursday, but this was met by headwinds as the New Year’s holiday weekend began to shadow. Trading will likely remain light early this week and full volumes may not return to Forex until the second week of January. However, the ability of the EUR/USD to climb to mid-term highs and sustain value over the 1.10000 mark is noteworthy. Early August and late July 2023 values are in sight for speculators of the EUR/USD.
Higher Values and Bullish Wagering in January
- As January gets started traders should watch support levels. If the 1.10200 to 1.10100 levels sustain values, this may be an indication more buying will start to filter into the EUR/USD.
- The mid-term outlook for the USD has become weaker, and many financial institutions likely believe the EUR/USD may be undervalued if it is trading below the 1.10000 level.
- Having challenged highs near the 1.11400 level may be a looking glass into EUR/USD speculative outlooks. However, traders should not get overly ambitious, particularly if they are day traders and need to be more conservative.
EUR/USD Outlook for January 2024:
Speculative price range for EUR/USD is 1.09510 to 1.11925
Risk appetite appears optimistic as January gets ready to begin. U.S. Treasury yields have continued to decrease. The outlook for the USD is certainly weaker because of U.S inflation data which has produced lower-than-expected numbers recently, potentially helping the Federal Reserve to cut interest rates within a handful of months. If the EUR/USD climbs above the 1.10500 mark and begins to show the ability to sustain this value, buyers may begin to rapidly seek additional bullish positions.
Price velocity should be watched intently by day traders. Holiday volumes will remain questionable this week, but as financial institutions become fully involved the trading by Monday the 8th of January should be dynamic. If choppiness occurs in the next couple of weeks with downside pressure, traders may remain bullish nevertheless. To handle potential reversals lower speculators should be using stop loss orders to protect their accounts and wait out the ‘lows’.
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