The EUR/USD pair advanced slightly on Monday but remained trading within a narrow range amid thin trading volume, with many European markets closed in observance of Boxing Day.
At the time of writing, the EUR/USD pair is trading at the 1.0630 area, 0.14% above its opening price, oscillating between a high of 1.0634 and a low of 1.0594.
Ahead of the New Year, no first-tier data will be released, so the markets' pace will be dictated by risk impulses and by the investors' assessment of how the Federal Reserve will balance a recession and control inflation.
On Friday, U.S. Personal Consumer Expenditure (PCE) data showed core PCE price index (a closely-followed inflation gauge) grew by 4.7% year-over-year in November, easing from the previous month's rate of 5%. This was the second straight decline in the PCE inflation rate to the lowest since October 2021.
Still, data had little impact on markets. The WIRP tool suggests that investors are discounting higher odds of a 25 bps increase in the next Fed meeting on February 1st, which would take the target range for the federal funds rate to 4.50%-4.75%.
From a technical standpoint, the EUR/USD short-term bias remains tilted to the upside, with indicators pointing to decreasing bullish potential on the daily chart. In contrast, the price trades above its main moving averages but remains capped by the 1.0660 area.
A break above 1.0660 could pave the way toward the 1.0700 psychological threshold en route to the December monthly high of 1.0736. On the other hand, the immediate support level could be faced at the 1.0550-55 area, where the 20-day SMA converges with a broken trendline, followed by the 1.0500 zone.
