EUR/USD Forecast: Euro unlikely to break out of trading range

• EUR/USD has gone into a consolidation phase following Thursday's rebound.
• Trading action is likely to remain subdued on the last trading day of 2022.
• 1.0680 aligns as immediate resistance for the pair.

EUR/USD has lost its bullish momentum and retreated to the 1.0650 area after having registered modest gains on Thursday. In the absence of high-impact macroeconomic data releases, investors are unlikely to commit to large positions on the last trading day of the year. Hence, EUR/USD should continue to fluctuate in its weekly range.

The positive shift witnessed in the risk mood on Thursday made it difficult for the US Dollar to find demand and helped EUR/USD push higher. Bargain shopping ahead of the New Year holiday may have triggered the rally in Wall Street's main indexes as there were no apparent fundamental drivers that could have impacted the sentiment in a significant way.

On Friday, the only data from the euro area revealed that the Harmonized Index of Consumer Prices in Spain declined to 5.6% on a yearly basis in December's flash reading from 6.7% in November. This data, however, failed to influence the Euro's performance against its rivals in a noticeable way.

The ISM Chigao's Purchasing Managers Index for December will be the only data featured in the US economic docket. US stock index futures are down between 0.25% and 0.5%, suggesting that the US Dollar could hold its ground in the second half of the day in case the mood sours.

Nevertheless, with the US bond markets closing early on Friday, it wouldn't be surprising to see choppy action in EUR/USD.

EUR/USD Technical Analysis

EUR/USD's action on Thursday confirmed 1.0680 (static level, end-point of the latest uptrend) as strong resistance ahead of 1.0700 (psychological level) and 1.0735 (December 15 high).

On the downside, 1.0625 (50-period Simple Moving Average (SMA)) aligns as first support before 1.0600 (100-period SMA). A four-hour close below the latter could attract sellers and open the door for an extended slide toward 1.0580 (Fibonacci 23.6% retracement) and 1.0500 (psychological level, 200-period SMA).