• EUR/USD alternates gains with losses around the 1.1300 zone.
  • Daily support emerges near 1.1280 so far on Friday.
  • November’s Payrolls is expected at 550K and jobless rate at 4.5%.

The European currency trades without a clear direction and motivates EUR/USD to gyrate around the 1.1300 neighbourhood so far at the end of the week.

EUR/USD looks to US docket

EUR/USD remains under some tepid downside pressure after hitting weekly tops in the 1.1380/85 band on November 30.

The gradual recovery in the greenback coupled with fresh omicron concerns have put the pair under pressure in past sessions, all against the backdrop of persisting risk aversion mood among market participants.

On the ECB front, Chairwoman Lagarde said there is uncertainty about how fast the new variant of the coronavirus could spread in the euro area, adding that another wave of the pandemic is already factored in in the ECB’s adverse scenario. Lagarde also noted the central bank sees inflation declining in 2022, while she expects energy prices to be substantially lower by end of the next year. Earlier, Board member Knot do not rule out an interest rate hike in 2023 in case inflation surpasses expectations next year.

In the euro calendar, final November Services PMIs are due seconded by Retail Sales in the euro area. In the NA session, November’s Nonfarm Payrolls and the Unemployment Rate will be in the centre of the debate seconded by Factory Orders, the ISM Non-Manufacturing and the final Services PMI tracked by Markit.

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: 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 losing 0.08% at 1.1292 and faces the next up barrier at 1.1382 (weekly high November 30) followed by 1.1464 (weekly high Nov.15) and finally 1.1519 (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).

 

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