EUR/USD steady approaches 1.1600 amid overall US dollar weakness
|- The US Dollar is under selling pressure amid higher US T-bond yields.
- The single currency extends its two-day sharp rise, threatening to break above 1.1600.
- EUR/USD: A break above 1.1600 would expose 1.1650; otherwise, it could fall towards 1.1400.
The EUR/USD advances for the second day in a row, beginning the week in the right foot, up 0.18%, trading at 1.1587 during the day at the time of writing. Positive market sentiment as witnessed by rising US stock indices surrounds the financial markets. In the FX market, risk-sensitive currencies rise, with the NZD, the GBP, and the AUD, as the strongest ones, while the greenback falls, despite higher US T-bond yields.
In the last week, three central banks held their monetary policy reunions. They all pushed back higher interest rates, in line with what European Central Bank (ECB) President Christine Lagarde expressed two weeks ago. On Monday, Philip Lane, ECB’s Chief Economist, said that supply bottlenecks and higher energy prices are the main risks of inflation and economic recovery. Furthermore, added that “our [ECB] analysis is indicating that the euro area is still confronted with weak medium-term inflation dynamics remains compelling.” Further said that economic activity could outperform the central bank’s expectations only if consumer confidence increase and saves less tha expected.
In the meantime, the Federal Reserve announced the reduction by $15 billion to its Quantitative Easing program. Moreover, it left the door open for adjustments to the taper. If economic conditions improve faster than expected, the US central bank could increase the pace of reduction of its bond purchases program, meaning that it could finish sooner than the first half of 2022 as widely expected.
That said, the European economic docket will feature on Tuesday, the Zew Survey on Tuesday, and some ECB members' speeches. ECB's President Christine Lagarde and also Isabel Schnabel will cross the wires.
Across the Atlantic, the Producer Price Index will be unveiled. Also, Federal Reserve Chairman Jerome Powell will hit the wires.
EUR/USD Price Forecast: Technical outlook
In the daily chart, the shared currency bounced off the low around 1.1500, approaching the 1.1600 figure, which was respected in the last four previous tests, would be a strong resistance level to overcome. A daily close above the latter would expose the EUR/USD for further gains. The first supply zone would be a downward slope that confluences with the 50-day moving average around the 1.1650-80 area. A break above the abovementioned would open the door towards the October 28 high at 1.1691.
On the flip side, failure at 1.1600 would open the door for further downside, with the October 13 low at 1.1524, as the first demand zone. A break below the latter would expose the single currency towards new yearly lows, around the 1.1400 figure.
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