EUR/USD analysis: reality check for dollar's bulls

Valeria Bednarik FXStreet

EUR/USD Current price: 1.2036

Hawkish ECB and poor US PPI data push the EUR/USD toward critical 1.2100 level.
US December Retail Sales and CPI to determinate dollar's fate.

Dollar's strength, backed by speculation that the Fed will maintain its tightening path, suffered one huge reality check this Thursday, following the release of December PPI figures. The producer price index for final demand fell 0.1% in December, the first decline in over a year. Yearly basis, inflation at factory gates was up 2.6%, against previous 3.1% and the 3.0% expected. Adding fuel to the fire, initial jobless claims for the week ended January 5th resulted at 261K, the highest reading in three months, against the expected 250K. Inflation readings completely offset the hawkish tone of Fed's speakers these days. The EUR/USD pair jumped to 1.2058, its highest for the week, to settle in the US afternoon around 1.2030, as the common currency got an additional boost from ECB's Meeting Minutes, reiterating the upbeat assessment of the economic outlook, but still showing EU policymakers concerned about inflation.

The week is set to end on a high note with the US publishing December Retail Sales and inflation data. Sales are expected to have advanced by 0.4% in the month, while inflation is seen rising 0.2%. If the last misses market's forecast, the greenback will likely fall further and longer.

Technically, the 4 hours chart shows that indicators have reached overbought levels before losing upward strength, but also that the pair bounced from its 100 SMA once again, while it also surpassed its 20 SMA, which gains traction upwards around the 38.2% retracement of the latest weekly bullish run. The pair also settled above the 23.6% retracement of the same rally, around 1.2000, now the immediate support, while the highs set monthly basis during the last couple of years around 1.2100 are the main upcoming resistance, as beyond the level, the pair will likely accelerate north, with the market then eyeing 1.2260 the next long-term resistance.

Support levels: 1.2000 1.1960 1.1920

Resistance levels: 1.2065 1.2100 1.2140

View Live Chart for the EUR/USD

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

EUR/USD climbs to two-week highs beyond 1.1900

EUR/USD is keeping its foot on the gas at the start of the week, reclaiming the 1.1900 barrier and above on Monday. The US Dollar remains on the back foot, with traders reluctant to step in ahead of Wednesday’s key January jobs report, allowing the pair to extend its upward grind for now.

GBP/USD hits three-day peaks, targets 1.3700

GBP/USD is clocking decent gains at the start of the week, advancing to three-day highs near 1.3670 and building on Friday’s solid performance. The better tone in the British Pound comes on the back of the intense sekk-off in the Greenback and despite re-emerging signs of a fresh government crisis in the UK.

Gold treads water around $5,000

Gold is trading in an inconclusive fashion around the key $5,000 mark on Monday week. Support is coming from fresh signs of further buying from the PBoC, while expectations that the Fed could turn more dovish, alongside concerns over its independence, keep the demand for the precious metal running.

Crypto Today: Bitcoin steadies around $70,000, Ethereum and XRP remain under pressure

Bitcoin hovers around $70,000, up near 15% from last week's low of $60,000 despite low retail demand. Ethereum delicately holds $2,000 support as weak technicals weigh amid declining futures Open Interest. XRP seeks support above $1.40 after facing rejection at $1.54 during the previous week's sharp rebound.

Japanese PM Takaichi nabs unprecedented victory – US data eyed this week

I do not think I would be exaggerating to say that Japanese Prime Minister Sanae Takaichi’s snap general election gamble paid off over the weekend – and then some. This secured the Liberal Democratic Party (LDP) an unprecedented mandate just three months into her tenure.

Ripple exposed to volatility amid low retail interest, modest fund inflows

Ripple (XRP) is extending its intraday decline to around $1.40 at the time of writing on Monday amid growing pressure from the retail market and risk-off sentiment that continues to keep investors on the sidelines.