EUR/USD Analysis – January 11, 2022

Daily Price Outlook

EUR/USD closed at $1.1324 after hitting a high of $1.1362 and a low of $1.1285. The EUR/USD dropped on Monday and lost some of its previous gains on the back of the rising US dollar's strength. The US Dollar Index was strong on the day, closing at 95.99. The dollar was high because of the bets that the Fed would decide to increase interest rates sooner than expected this year.

Market participants were awaiting US CPI report, which is due on Wednesday, giving clues about the potential rate hike. Ahead of this report, US dollar investors kept buying and pushed DXY higher for the day. On the data front, at 14:00 GMT, the Italian Monthly Unemployment Rate dropped to 9.2%, against the expected 9.3%, and supported the single currency euro.

At 14:30 GMT, the Sentix Investor Confidence rose to 14.9 against the forecasted 12.6 and supported the Euro. At 15:00 GMT, the unemployment rate for Europe remained flat at 7.2%. Most of the data from Europe favored the Euro, which limited the decline in the EUR/USD currency pair on Monday. From the US side, there was not much data released on Monday. However, at 20:00 GMT, the final wholesale inventories rose to 1.4% against an estimated 1.2% and weighed on the US dollar, which also capitulated further losses in the EUR/USD pair.

On the other hand, the Euro was under pressure following the latest comments from ECB board member Isabel Schnabel. She said that persistently high energy prices run the risk of leading to unsustainable inflation, which might push the ECB to increase its initial forecasts. However, she stressed that the bloc's climate policies likely mean high energy values will linger or increase further. According to EU data last week, inflation in the eurozone surged to a yearly rate of 5% in December, which was well above the target of 2%. However, it was still not prompting the ECB to tighten monetary policy. These comments from Schnabel suggest that any uptick in the ECB's inflation forecast at its upcoming meeting in March could increase the expectations of earlier tightening from the ECB. However, there are clear signals from the US Federal Reserve that the interest rate might increase in March.

This was keeping the Euro under pressure against the dollar and dragging EUR/USD to the downside on Monday. The US dollar was gaining strength from bets on an aggressive path of rate hikes from the Federal Reserve as soon as March. These are only expected to accelerate later this week after the release of US inflation data on Wednesday. The US is expected to report its fastest inflation rate since 1982, which will only push the Fed closer to raising interest rates in March. The strength of the US dollar dragged the EUR/USD pair to the downside on Monday. Meanwhile, Pfizer reported that it was developing a vaccine specifically for the Omicron variant and that the vaccine would be ready in March. This report sparked some market optimism and limited further losses in the riskier currency pair of EUR/USD.

EUR/USD Intraday Technical Levels

Daily Technical Levels

Support Resistance

1.1284 1.1361

1.1246 1.1400

1.1208 1.1438

Pivot Point: 1.1323

EUR/USD - Technical Outlook

On Tuesday, the EUR/USD is trading bullish at the 1.1341 level, soaring above an intraday pivot point level of 1.1321. On the downside, the EUR/USD’s immediate support stays at 1.1321 or 1.1260 level, and a break below 1.1260 level exposes the pair towards 1.1233 level.

The EUR/USD’s major resistance stays at 1.1358 or 1.1396 levels on the bullish side. The RSI and Stoch RSI are holding in a buying zone; therefore, the breakout of the 1.1358 support level adds a buying pressure. Thus, bullish bias dominates above 1.1321 and vice versa. All the best!