EUR/USD Analysis – December20, 2021

Daily Price Outlook

The EUR/USD closed at $1.1239 after setting a high of $1.1350 and a low of $1.1235. The EUR/USD dropped on Friday after rising for two consecutive sessions amid the strength of the U.S. dollar and the weakness of the single currency euro. The market sentiment was low, spurred by the monetary policy decisions announced by three of the most important central banks, as investors started booking their profits and rebalancing their portfolios. Meanwhile, the rising concerns related to the Omicron variant also supported the risk-off sentiment, which added pressure on risk-related currency pairs like EUR/USD.

The Omicron variant extended its spread rapidly and forced many European countries to re-impose lockdown measures. The latest country to announce a painful Christmas COVID lockdown was the Netherlands. The likelihood that more countries will re-impose lockdown restrictions as the Christmas and New Year holidays approach continued to support the risk-off market sentiment.

The White House medical adviser, Dr. Anthony Fauci, suggested that people get booster shots and always wear masks in crowded public spaces while traveling to meet their loved ones. He further said that traveling would only increase the risk of infection, even among vaccinated people. The number of COVID cases in the United States has increased by about 50% since the beginning of this month, which has bolstered the safe-haven appeal in the market, pushing the USD higher and adding stress to the EUR/USD currency pair.

At 12:00 GMT, the German PPI declined to 0.8% from the expected 1.4% and weighed on the euro on the data front. At 14:00 GMT, the German ifo Business Climate also dropped to 94.7, against an estimated 95.3, and weighed on the single currency euro. At 15:00 GMT, the final CPI for the year remained flat at 4.9%. The final core CPI also remained unchanged at 2.6%. Most of the data from Europe was unfavorable, which ultimately added more downward pressure on the EUR/USD currency pair.

Meanwhile, this week, three major central banks, including the Federal Reserve, the European Central Bank, and the Bank of England, announced their monetary policy decisions. The U.S. Fed and ECB kept their interest rates unchanged but decided to speed up their winding down of asset purchases to end the process by March. At the same time, the Bank of England became the first bank in history to announce a rate hike this month after the pandemic started two years ago. Market participants were pricing these events, taking profits, and balancing their portfolios, which kept the market sentiment lower for the day before the weekend, and riskier currency pairs like EUR/USD suffered.

EUR/USD Intraday Technical Levels

Daily Technical Levels

Support Resistance

1.1238 1.1247

1.1231 1.1251

1.1228 1.1257

Pivot Point: 1.1241

EUR/USD - Technical Outlook

The EUR/USD is trading at the 1.1253 level, gaining immediate support at the 1.1234 level. The direct currency pair’s immediate resistance stays at 1.1273 level, and the closing of candles below this is pressuring on it. A rise in buying pressure and break above 1.1273 resistance level exposes the pair towards 1.1311 or 1.1348 resistance levels.

Alternatively, the support levels continue to hold at 1.1234 and 1.1197. A bearish breakout increases the chances of a downtrend until the 1.1158 support zone. All the best!