EUR/USD clings to daily gains around 1.1300, looks to data, FOMC

EUR/USD regains upside traction around 1.1300 midweek.
German final Services PMI slipped back into the contraction territory.
Investors’ attention remains on the release of the FOMC Minutes.

Pablo Piovano FXStreet

The single currency regains the smile and motivates EUR/USD to return to the area above the key 1.1300 the figure.

EUR/USD appears supported around 1.1270

EUR/USD reverses two consecutive daily declines and regains the 1.1300 neighbourhood on the back of the corrective downside in the greenback and amidst some loss of momentum in US yields on Wednesday.

In fact, the better note in the risk complex weighs on the buck and lends the pair fresh oxygen against the backdrop of rising cautiousness among market participants ahead of the release of critical data in the US docket later in the week (Nonfarm Payrolls).

In the domestic calendar, the German Services PMI retreated to the contraction territory after dropping to 48.7 in December, while the same indicator in the broader euro bloc came at 53.3 (from 55.9). Later in the US trading hours, weekly Mortgage Applications measured by MBA are due in the first turn seconded by the ADP report for the month of December, while the FOMC Minutes will close the daily docket.

What to look for around EUR

EUR/USD met quite decent contention in the 1.1270 zone so far in the first week of the new year. In the meantime, price action around spot is expected to follow dollar-dynamics as well as the policy divergence between the ECB vs. the Federal Reserve and the response to the persistent elevated inflation on both sides of the Atlantic. On another front, the unabated progress of the coronavirus pandemic coupled with the fast-spreading omicron variant remain as the exclusive factor to look at when it comes to the economic growth prospects and investors’ morale.

Key events in the euro area this week: EMU/Germany Final Services PMIs (Wednesday) - Germany Advanced December Inflation Rate (Thursday) - EMU Advanced December Inflation Rate (Friday).

Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the euro area. ECB stance/potential reaction to the persistent elevated inflation in the region. ECB tapering speculation/rate path.

EUR/USD levels to watch

So far, spot is up 0.14% at 1.1302 and faces the next up barrier at 1.1386 (monthly high November 30) followed by 1.1464 (weekly high Nov.15) and finally 1.1520 (200-week SMA). On the other hand, a break below 1.1272 (weekly low Jan.4) would target 1.1221 (weekly low Dec.15) en route to 1.1186 (2021 low Nov.24).

Author

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

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