- EUR/USD drifted into the negative territory for the second successive day on Tuesday.
- Hawkish Fed expectations continued underpinning the USD and exerted some pressure.
- Encouraging German/Eurozone macro data failed to impress bulls or provide any impetus.
The EUR/USD pair dropped to over one-week low, around mid-1.1200s during the early European session, albeit quickly recovered a few pips thereafter. The pair was last seen trading around 1.1270 area, down only 0.10% for the day.
The pair struggled to capitalize on its modest uptick, instead met with a fresh supply near the 1.1300 mark and turned lower for the second successive day on Tuesday. This also marked the fourth day of a downtick in the previous five sessions and was sponsored by the emergence of some US dollar buying.
Investors have been pricing in the prospects for an eventual Fed liftoff in May 2022 amid worries about stubbornly high inflation. This, along with a further recovery in the US Treasury bond yields, continued underpinning the greenback and exerted some downward pressure on the EUR/USD pair.
Meanwhile, the risk sentiment remained well supported by easing fears about the economic fallout from the new Omicron variant of the coronavirus. This, in turn, held back traders from placing aggressive bullish bets around the safe-haven USD and helped limit the downside for the EUR/USD pair.
On the economic data front, German Industrial Production data, which recorded strong growth and jumped 2.8% MoM in October. Apart from this, the German and Eurozone ZEW Economic Sentiment Index surpassed market expectations and further extended some support to the shared currency.
That said, the EUR/USD pair's inability to gain any meaningful traction favours bearish traders and supports prospects for a further near-term depreciating move. Hence, a subsequent fall back towards testing sub-1.1200 levels, or the YTD low touched in November, remains a distinct possibility.
There isn't any major market-moving economic data due for release from the US on Tuesday, leaving the USD at the mercy of the US bond yields. Apart from this, the broader market risk sentiment will influence the USD price dynamics and produce some trading opportunities around the EUR/USD pair.
Technical levels to watch
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.
Recommended content
Editors’ Picks
EUR/USD stays below 1.0700 ahead of US data
EUR/USD stays in a consolidation phase slightly below 1.0700 in the European session on Wednesday. Upbeat IFO sentiment data from Germany helps the Euro hold its ground as market focus shifts to US Durable Goods Orders data.
USD/JPY refreshes 34-year high, attacks 155.00 as intervention risks loom
USD/JPY is renewing a multi-decade high, closing in on 155.00. Traders turn cautious on heightened risks of Japan's FX intervention. Broad US Dollar rebound aids the upside in the major. US Durable Goods data are next on tap.
Gold manages to holds above $2,300
Gold struggles to stage a rebound following Monday's sharp decline but manages to hold above $2,300. The benchmark 10-year US Treasury bond yield stays in the green above 4.6% ahead of US data, not allowing XAU/USD to gain traction.
Worldcoin looks set for comeback despite Nvidia’s 22% crash Premium
Worldcoin price is in a better position than last week's and shows signs of a potential comeback. This development occurs amid the sharp decline in the valuation of the popular GPU manufacturer Nvidia.
Three fundamentals for the week: US GDP, BoJ and the Fed's favorite inflation gauge stand out Premium
While it is hard to predict when geopolitical news erupts, the level of tension is lower – allowing for key data to have its say. This week's US figures are set to shape the Federal Reserve's decision next week – and the Bank of Japan may struggle to halt the Yen's deterioration.