|

EUR/USD comes under pressure, still above 1.1300

  • Sellers seem to have returned and drag EUR/USD ack to 1.1300.
  • Higher yields, omicron concerns, Powell support the dollar.
  • Germany’s Retail Sales contracted 0.3% MoM, 2.9% YoY in October.

The improved sentiment in the greenback drags EUR/USD once again to the 1.1300 neighbourhood on Wednesday.

EUR/USD focuses on Powell, US data

EUR/USD keeps the choppy performance so far this week, with gains limited around the 1.1380 region (November 30) after bouncing off last week’s new cycle lows around 1.1186 (November 24).

The better tone in the greenback comes on the back of the recovery in US yields along the curve while the hawkish message from Chief Powell at his testimony before the Senate on Tuesday also added to the dollar’s rebound.

It is worth recalling that Powell said the Fed will discuss increasing the tapering pace at the December meeting, while he now poured doubts over the transitory stance of the current elevated inflation.

In the meantime, fresh concerns over the omicron variant, the rapid increase of COVID cases around the world and the likeliness of lockdown measures in many economies continue to cloud the near-term outlook for the European currency.

In the domestic calendar, Retail Sales in Germany contracted at a monthly 0.3% in October and 2.9% from a year earlier. Still in Germany, the final Manufacturing PMI came in at 57.4, while the same gauge in the broader Euroland was 58.4.

Across the Atlantic, Mortgage Applications measured by MBA are due seconded by the ADP report, the final Markit’s Manufacturing PMI and the always relevant ISM Manufacturing. In addition, Chief Powell will testify once again and Treasury Secretary J.Yellen is due to speak.

What to look for around EUR

EUR/USD manages well to keep the trade above the 1.1300 mark amidst an erratic week so far. The corrective downside in the greenback propped up the recent move higher in spot, although this is regarded as temporary. Fresh coronavirus concerns sparked after the new variant omicron was discovered last week is likely to keep the demand for the safe haven on the raise at least in the very near term. In the meantime, the outlook for the European currency remains well into the bearish territory on the back of the ECB-Fed policy divergence, increasing COVID-19 cases in Europe as well as some loss of momentum in the economic recovery in the euro area, as per some weakness observed in key fundamentals.

Key events in the euro area this week: German Retail Sales, EMU/Germany Final Manufacturing PMIs (Wednesday) – EMU Unemployment Rate (Thursday) – EMU/Germany Final Services PMIs, ECB’s Lagarde (Friday).

Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the region. Increasing likelihood that elevated inflation could last longer. Pick-up in the political effervescence around the EU Recovery Fund in light of the rising conflict between the EU, Poland and Hungary on the rule of law. ECB tapering speculations.

EUR/USD levels to watch

So far, spot is retreating 0.08% at 1.1328 and faces the next up barrier at 1.1382 (weekly high November 30) followed by 1.1464 (weekly high Nov.15) and finally 1.1535 (55-day SMA). On the other hand, a break below 1.1186 (2021 low Nov.24) would target 1.1185 (monthly low Jul.1 2020) en route to 1.1168 (low Jun.19 2020).

Author

Pablo Piovano

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

More from Pablo Piovano
Share:

Editor's Picks

GBP/USD clings to 1.3500 amid marginal losses

GBP/USD alternates gains with losses around the 1.3500 neighbourhood on Tuesday. Indeed, Cable struggles to further extend its incipient recovery in a context of continuous instability in the Middle East and modest gains in the Greenback.

EUR/USD alternates gains with losses near 1.1540

EUR/USD navigates a tight range near 1.1550 in the latter part of Tuesday’s NA session. The US Dollar’s vacillating price action accompanies the pair while market participants gear up for the crucial US inflation data due on Wednesday.

Gold loses the grip below $4,400

Gold retreats from its earlier tops and briefly revisited the $4,350 region per troy ounce on Tuesday. The yellow metal’s modest retracement follows lacklustre gains in the US Dollar and declining US Treasury yields across the curve, all amid steady uncertainty from the geopolitical landscape.

Shiba Inu Price Forecast: SHIB extends sell-off despite surging futures Open Interest
Shiba Inu (SHIB) maintains a bearish outlook on Tuesday, as it edges lower at $0.00000450. This marks the seventh day the meme coin has sustained a sell-off, weighed down by a weak technical structure. Shiba Inu derivatives continue to gain momentum, with perpetual futures Open Interest (OI) rising to 11.08 trillion SHIB on Tuesday, from 10.46 trillion the day before.
The inflation narrative is still way more important than the employment story
Core bonds sold off yesterday with the belly of the curve slightly underperforming in the US while European curves showed more of a bear flattening. Daily changes on the US curve varied between +4.7 bps (2-yr) and +6.4 bps (7-yr).
9-3: Is the Federal Reserve’s vote tally Warsh's new forward guidance?
The rate did not move. Neither did the statement, and that’s the more interesting fact. Set the July 29 Federal Open Market Committee (FOMC) statement beside the one issued on June 17, and the two documents are identical apart from a single verb and a paragraph at the bottom naming three dissenters.