EUR/USD Analysis – December 16, 2021

Daily Price Outlook

The EUR/USD pair ended the day at $1.1285 after reaching a high of $1.1300 and a low of $1.1221. The EUR/USD rose on Wednesday after dropping for two consecutive sessions. The losses in EUR/USD could be attributed to the subdued movement of the US dollar. On Wednesday, the US dollar came under pressure despite the Federal Reserve’s announcement that it was doubling up the pace of reducing economic support. At its December monetary policy meeting, the Fed said that it would double the pace of its QE taper to $30B a month from January. This news pushed Wall Street higher and, in turn, limited the dollar’s strength.

After the monetary policy meeting, US Federal Reserve chairman Jerome Powell noted that economic activity was on track to expand robustly this year. However, he added that the Omicron variant still poses risks to the outlook. He also noted that all officials think the labour market will reach maximum employment next year. He further said that the Fed’s focus would remain on bottlenecks and supply constraints as inflation is expected to decline by more than 2% by the end of next year. Given these comments, the stock market skyrocketed and pushed the dollar back to the downside, strengthening its rival currencies.

On the data front, at 12:45 GMT, the French Final CPI remained flat with expectations of 0.4%. At 18:30 GMT, core retail sales in the United States fell to 0.3%, versus the expected 0.9%, weighing on the greenback. Retail sales in November fell by 0.3% versus a predicted 0.8% drop, weighing on the US dollar. The Empire State Manufacturing Index rose to 31.9 against a forecasted 24.9 and supported the US dollar. Import prices also improved by 0.7% against the anticipated 0.5% and supported the US dollar.

At 20:00 GMT, business inventories surged to 1.2% against an estimated 1.0% and weighed on the dollar. The NAHB Housing Market Index remained flat with projections of 84. Most of the data came from the US side, which weighed on the US dollar, ultimately putting upward pressure on the currency pair EUR/USD.

Meanwhile, the focus of market participants shifted to the European Central Bank as it is expected to hold its monetary policy meeting on Thursday. The bank is widely expected to maintain its current policy on hold. The single currency euro gathered strength ahead of the release of the ECB’s monetary policy decision and helped the currency pair EUR/USD remain higher on board on Wednesday.

EUR/USD Intraday Technical Levels

Daily Technical Levels

Support Resistance

1.1231 1.1305

1.1206 1.1352

1.1158 1.1378

Pivot Point: 1.1279

EUR/USD - Technical Outlook

The EUR/USD is trading at the 1.1284 level, gaining immediate support at 1.1271, which is extended by a pivot point level. The break below the 1.1271 level exposes the pair towards the next support level of the 1.1243 level. Further on the lower side, the next support stays at 1.1193 or 1.1162.

On the upper hand, the downward trendline extends resistance at the 1.1290 level. The break above this level exposes the EUR/USD towards the 1.1320 or 1.1348 level. On Thursday, the bullish bias dominates over the 1.1271 level. All the best!