EUR/USD remains rangebound, with upside attempts capped below 1.0660 area

• The Euro pulls back below 1.0640 after another rejection at the 1.0660 resistance area.
• Concerns about China and escalating tensions in Ukraine have dampened market optimism.
• EUR/USD seen at 1.0892/10944 in Q1, 2023 – Credit Suisse.

The Euro has turned lower during Thursday’s European trading session, unable to breach 1.0660/70 resistance in the fourth consecutive attempt this week. The pair remains trading within a 60-pip horizontal range on a thin post-Christmas market.

COVID-19 and Ukraine’s war dampen appetite for risk

Investors’ moderate appetite for risk seen in the first half of the week faded on Thursday, as reports from the surging coronavirus infections in China are casting doubts about the economic recovery of the Asian country.

The exponential increase in COVID-19 cases since the Chinese authorities relaxed its Zero-Covid policy is overwhelming the country’s healthcare system. This has raised suspicion about China’s transparency which has forced the US, Italy, and India, so far, to impose mandatory tests on arrivals from China.

Furthermore, tensions are escalating in Ukraine with news reporting heavy shelling in Kyiv and other cities after the Kremlin refused to accept Zelenski’s 10-point peace plan., which is putting additional negative pressure on the Euro.

On the economic calendar, in absence of key Eurozone data, the US US weekly jobless claims and crude oil stocks figures might offer a fresh impulse to Forex markets.

EUR/USD is aiming to 1.0892/1.0944 – Credit Suisse

From a technical point of view, analysts at Credit Suisse see the pair biased higher over the next months: “We expect further strength in Q1 2023, reinforced by the large top in front-end US/Europe interest rate differentials(…)We maintain our existing bullish call for 1.0892/1.0944 – the 50% retracement of the 2021/2022 fall and broken trend resistance from early 2017, with this then ideally capping to define the top of a broad range.”

Technical levels to watch