EUR/USD lacks any firm intraday direction, remains confined in a one-week-old range

• EUR/USD oscillates in a familiar trading range amid mixed fundamental cues.
• The Fed rate cut uncertainty holds back the USD bulls from placing fresh bets.
• Expectations that the ECB will keep rates higher for some time lend support.
• Traders also prefer to wait on the sidelines ahead of the US CPI on Thursday.

The EUR/USD pair struggles to gain any meaningful traction on Wednesday and remains confined in a familiar range held over the past week or so. Spot prices trade around the 1.0930-1.0925 region during the Asian session, awaiting the release of the latest consumer inflation figures from the United States (US) on Thursday for some meaningful directional impetus.

Heading into the key data risk, a report by the New York Fed showed on Monday that US consumers' projection of inflation over the short run fell to the lowest level in nearly three years in December. This reaffirms market bets for an imminent shift in the Federal Reserve's (Fed) policy stance, which holds back the US Dollar (USD) bulls from placing aggressive bets and should act as a tailwind for the EUR/USD pair.

That said, the better-than-expected US monthly jobs report released on Friday pointed to a still-resilient labor market and gives the Fed more headroom to keep interest rates higher for longer. Adding to this, hawkish remarks by several Fed officials recently dashed hopes for aggressive policy easing. This remains supportive of elevated US Treasury bond yields, which underpins the buck and weighs the EUR/USD pair.

The shared currency is further pressured by dismal German data released on Tuesday, which showed that Industrial Production plunged by 0.7% in November as compared to a 0.3% rise anticipated. This increases the odds of a recession in Europe’s largest economy and bets for a 25 basis points (bps) rate cut by the European Central Bank (ECB) in April, which contributes to the offered tone surrounding the EUR/USD pair.

That said, the expected jump in the Eurozone inflation last month could allow the ECB to keep interest rates at record highs for some time. This, in turn, warrants some caution for bearish traders and positioning for any meaningful depreciating move for the EUR/USD pair. Traders now look to French Industrial Production data and Italian Retail Sales figures for some impetus in the absence of any relevant macro data from the US on Wednesday.

Technical levels to watch