EUR / USD trapped within familiar range, focus on US stimulus and euro zone PMIs

• The recent EUR / USD range remains intact despite optimism for the US stimulus.
• The United States Congress promises to get out of fiscal stagnation before the end of the year.
• Euro zone PMIs could show a new coronavirus-induced economic slowdown.

While the EUR / USD has gained some positive traction, has yet to break out of its recent range of 1.2059 to 1.2178.

Stimulus hopes weigh on the USD

The pair is currently trading 0.01% lower on the day at 1.2160, while US dollar is trading near 32-month lows when measured with the DXY dollar index.

During the Asian session, US Congressional leaders have vowed to break the deadlock on the coronavirus aid package, which has put selling pressure on the safe haven US dollar. However, until now, policy makers have been silent on the progress of the discussions.

The stimulus package, if approved it would be bearish for the US dollar. Improved prospects for further easing could keep EUR / USD higher before the publication of the PMI data for the euro zone and Germany, to be posted later in the day.

“Recent lockdowns should lower PMIs, but IFO’s expectations component could increase due to optimism about vaccines,” said Kathy Lien of BK Asset Management. “Even if it does, The German government’s decision to enter a national blockade until January 10 is a big problem for its economy and, in turn, for the euro“.

Weaker-than-expected PMIs could weigh on the EUR / USD even more so as its technical charts show signs of bullish fatigue around 1.2170. US retail sales data and the Federal Reserve rate decision could also influence the pair’s price action later on Wednesday.

EUR / USD technical levels