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Market enters lull ahead of New Year

The euro dipped 0.16% against the dollar to 1.1309 on Tuesday, December 28. During the North American session, the key pair dropped to 1.1290 amid a decline in US stock indices. Risk-off sentiment prevails as the year winds down amid thin volumes, virus-related anxiety, and concerns about a Fed rate hike. The single currency stopped weakening when the indices rebounded.

Today’s macro agenda (GMT 3)

12:00 Switzerland:  Credit Suisse economic sentiment (December), Eurozone: private loans (November)

16:15 US: ADP employment change (December)

18:30 US: EIA weekly petroleum status report

Current outlook

Volumes remain thin ahead of the New Year. The single currency is trending sideways within a range of 1.1290-1.1345. Price action is expected to hover around 1.1320 until the end of the year. The market will return to normal volumes after January 3. Today we could see the euro recover to 1.1330 as part of the correction after yesterday's decline.

Bottom line: EURUSD closed slightly lower on Tuesday. The euro came under pressure amid a decline in US stock indices. FX volumes remain subdued ahead of the New Year. Given that trading activity will likely be low-key today, we expect the price action to rebound to 1.1330 in line with a correction.

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