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With the holiday season fast approaching and no major catalysts expected on the forex calendar, we’re checking out consolidating price action in EUR/USD for a few different potential swing setups.

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Fresh Market Headlines & Economic Data:

S&P 500 rebounds from a 3-day losing streak even after Trump slams Covid stimulus bill

Trump throws Covid relief bill in doubt by asking Congress to amend it

Weekly jobless claims rise less than expected, but hold above 800,000

U.S. core capital goods orders, shipments rise in November

FHFA Federal Housing Finance Agency : House Price Index Up 1.5% in October; Up 10.2% from Last Year

U.S. Homebuyer demand for mortgages eases to end a record-breaking 2020

Canada’s economy expands more than expected amid second wave

Pfizer to supply U.S. with 100 million more COVID-19 shots by July

EU acts to prepare path to Brexit trade deal, EU sources say

Upcoming Potential Catalysts on the Economic Calendar

Japan Services PPI at 11:50 pm GMT
Canada Building Permits at 1:30 pm GMT (Dec. 24)

What to Watch: EUR/USD

EUR/USD 1-Hour Forex Chart
EUR/USD 1-Hour Forex Chart

On the one hour chart of EUR/USD above, we can see the pair has tightened up once again this week, likely on the lack of major market-moving events and ahead of the end-of-year holiday season.

We don’t have any major catalysts expected as well on the forex calendar, so we’re checking this pair out for a potential swing technical play, seeing if we can play the uptrend at a better price.

On the chart above, we can see a pattern of rising ‘lows’ that seems to draw in buyers on every retest. And with a pattern of lower ‘highs’ developing as well, odds are pretty good the technical bears could take this pair lower once again in the next few sessions, barring any surprise events.

If so, watch out for a retest of the rising ‘lows’ pattern for a short-term / swing long position, as technical traders may play the longer-term uptrend in the pair and the broad theme of USD weakness / “unlimited stimulus” that continues to drive risk sentiment higher.

Now if we do get a surprise geopolitical/economic event to rock the markets over the next few sessions, use the outer limits of the consolidation as a signal to potentially play a simple breakout play on EUR/USD.

Again, keep in mind that the overall trend is higher, so any downside breaks may be limited unless it is a doozy of a catalyst (e.g., no U.S. stimulus deal finalized, COVID vaccine-related news, war, etc.).

Of course, if it is a positive risk-related event (e.g., dramatic fall in COVID cases/hospitalizations, lockdowns lifted, an increase in U.S. stimulus, etc.), then with liquidity a bit light because of the holiday, an upside break could lead to a really fast rally in the short-term.