• EUR/USD has lost its bullish momentum following Friday's decisive rebound.
  • New coronavirus variant already detected in several European countries.
  • 1.1240 aligns as key support for EUR/USD in near term.

EUR/USD has staged a decisive rebound on Friday and climbed above 1.1300 before reversing its direction on Monday. The common currency is struggling to find demand as the detection of the coronavirus Omicron variant in several European countries revive concerns over tighter restrictions and lockdowns. On the other hand, the greenback remains at the mercy of the market pricing of the Fed's rate outlook.

Over the weekend, the Netherlands reported 13 confirmed cases of the Omicron variant. Austria, Belgium, Denmark, Italy and Germany are among the other European countries that detected the virus. 

The World Health Organization (WHO) warned on Monday that Omicron has an unprecedented number of spike mutations, some of which are concerning for their potential impact on the trajectory of the pandemic.

The euro could have a tough time outperforming the dollar if additional measures are introduced in Europe to curb the spread of the new variant. Meanwhile, Germany's Destatis will release the preliminary November Consumer Price Index (CPI) data later in the session. European Central Bank (ECB) executive board member Isabel Schnabel said on Monday that they think inflation has peaked in November.

There won't be any high-tier data releases from the US and investors will keep a close eye on the US Treasury bond yields. On Friday, the benchmark 10-year US T-bond yield fell nearly 10% as investors reassessed the odds of the Fed tightening its policy sooner than expected.

At the time of press, the CME Group's FedWatch Tool shows that there is a 34.7% probability of the Fed leaving its policy rate unchanged by June 2022, compared to 23.4% last Monday. Currently, the 10-year US T-bond yield is staying in the positive territory above 1.5% but another wave of risk-aversion could trigger one more leg lower in yields and hurt the dollar.

EUR/USD Technical Analysis

On the four-hour chart, EUR/USD is holding near the 50-period SMA at 1.1270. Below that level, 1.1240 (20-period SMA) aligns as the next key support. As long as buyers continue to defend this level, additional gains in the near term could be witnessed.

On the upside, 1.1320 (static level) could be seen as first resistance. In case this level turns into support, 1.1350 (Fibonacci 38.2% retracement level of the November downtrend) could be targeted ahead of 1.1380 (50-period SMA). 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news Join Telegram

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD remains pressured below 1.0250 amid renewed USD strength

EUR/USD remains pressured below 1.0250 amid renewed USD strength

EUR/USD remains pressured below 1.0250, undermined by a broad rebound in the US dollar after dismal Chinese data soured sentiment. Growing recession fears in the Eurozone amid the deepening energy crisis weigh down on the euro. 

EUR/USD News

GBP/USD drops below 1.2100 as US dollar firms up

GBP/USD drops below 1.2100 as US dollar firms up

GBP/USD is dropping below 1.2100, as the US dollar rebounds amid a negative shift in risk sentiment amid weak China data. BOE’s Bailey shows readiness for a ‘review’ on UK PM Candidate Truss’ criticism. Critical UK data and Fed minutes are in focus this week. 

GBP/USD News

Gold closes the week above 50 DMA, what’s next? Premium

Gold closes the week above 50 DMA, what’s next?

Gold price is reversing Friday’s rebound above $1,800, as bears return at the start of the week. Buyers appear to lack follow-through upside momentum, as souring risk sentiment revives the US dollar’s safe-haven appeal.

Gold News

Tezos to provide bulls a generous exit before a 15% nosedive

Tezos to provide bulls a generous exit before a 15% nosedive

Tezos Price is hovering above a stable support level after facing an intense rejection. While this foothold is likely to provide harbor, it will not be for long. Investors must prepare for a long squeeze as bears make an elaborate move.

Read more

FXStreet Premium users exceed expectations

FXStreet Premium users exceed expectations

Tap into our 20 years Forex trading experience and get ahead of the markets. Maximize our actionable content, be part of our community, and chat with our experts. Join FXStreet Premium today!

BECOME PREMIUM

Majors

Cryptocurrencies

Signatures