EUR/USD Forecast: Below 1.1300 and at risk of falling further
EUR/USD Current price: 1.1269
- Germany inflation surged to 6% YoY in November, ECB officials still believe it is temporal.
- Wall Street recovers as US President Joe Biden says no lockdown is needed for now.
- EUR/USD consolidates below 1.1300, could fall further once 1.1245 is broken.
The EUR/USD pair hovers near its daily low at 1.1257, as demand for the greenback picked up pace during US trading hours. In the absence of other catalysts, market participants remained focused on the coronavirus developments.
On Friday, stock markets collapsed following the announcement of a new covid variant discovered in South Africa named Omicron. However, the market’s reaction may have been exacerbated by thin market conditions due to the Thanksgiving holiday in the US. Despite urgent measures following the headline, over the weekend, news suggested that the strain has already spread globally, with cases reported in Canada, Australia and several European countries.
Asian equities fell at the weekly opening, but European and US indexes managed to post gains, with Wall Street rallying after President Joe Biden said that lockdowns are not needed for now. Meanwhile, US Treasury yields ticked higher, with that on the 10-year note currently at around 1.53%.
Also, European Central Bank (ECB) governing council member Pablo Hernandez de Cos said this Monday that European policymakers aim to avoid the premature tightening of the monetary policy, repeating that high inflation could be expected to be transitory, despite being stronger and more persistent than anticipated a few months ago.
On the data front, the EU published the November Economic Sentiment, which came as expected at 117.5, down from the previous 118.6. Germany published the preliminary estimate of its November Consumer Price Index, which came in higher than anticipated, up by 0.3% in the month and 6% YoY. The US published October Pending Home Sale, which rose 7.5%, and the November Dallas Fed Manufacturing Business Index that fell to 11.8 from 14.6 in the previous month. On Tuesday, the EU will publish November inflation figures, while the US will release November CB Consumer Confidence.
EUR/USD short-term technical outlook
The EUR/USD pair met sellers around the 23.6% retracement of its November decline at 1.1305, the immediate resistance level. The daily chart shows that the pair resumed its decline after correcting oversold conditions, with technical indicators heading back south well within negative levels. The 20 SMA has extended its decline, currently above the next Fibonacci resistance.
In the near term, and according to the 4-hour chart, EUR/USD is holding above a mildly bullish 20 SMA, while technical indicators corrected from overbought levels and turned flat within positive levels. The bearish potential seems limited at the time being, although a steeper decline could be expected on a break below 1.1245, the immediate support level.
Support levels: 1.1245 1.1200 1.1165
Resistance levels: 1.1305 1.1340 1.1395
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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.
