EUR/USD Forecast: Euro lacks direction heading into the new year

• EUR/USD stabilized below 1.1100 following Thursday’s downward correction.
• Euro is up more than 3% against the US Dollar this year.
• ECB-Fed monetary policy divergence could drive the pair’s action in the new year.

EUR/USD reversed its direction and registered daily losses after touching its highest level since late July at 1.1140 on Thursday. The pair trades in a tight channel below 1.1100 early Friday and it might have a difficult time finding direction, with trading conditions thinning out on the last trading day of the year.

The modest recovery seen in the US Treasury bond yields helped the US Dollar (USD) stay resilient against its rivals on Thursday and caused EUR/USD to stretch lower during the American trading hours. Nevertheless, EUR/USD remains on track to post gains for the third straight week and it’s up more than 1.5% in December.