Euro: Range-bound risks against US Dollar with ECB focus – OCBC

OCBC's Christopher Wong highlights EUR/USD's current range-bound status near 1.16, attributing the stability to a weaker US Dollar and stronger Eurozone data, which counteracts rising oil prices. The anticipation of a 25 basis point European Central Bank hike and improving Eurozone sentiment are viewed as factors that may keep the euro from falling further in the short term.

However, the presence of higher oil prices and political uncertainty in Germany introduce two-sided risks. Despite the upward movement in oil prices, EUR/USD maintained its position around the 1.16 level, supported by a softer USD and favorable Eurozone data. Markets anticipate a significant 25bp ECB hike during the upcoming meeting, coupled with the imminent US Consumer Price Index release.

While the outlook for the ECB's tightening cycle has become more challenging due to rising energy costs and moderate growth, the broad federal political implications remain contained for now. The market remains cautious about buying the pair, with support at 1.1560 (100 DMA) and 1.1510 (50 DMA), and resistance at 1.1630 (200 DMA) and 1.1710 levels.