EUR/USD Analysis – January 12, 2022

Daily Price Outlook

The EUR/USD exchange rate closed at $1.1364 after reaching a high of $1.1375 and a low of $1.1313. The EUR/USD reversed course again on Tuesday, turning green despite the day's weak US dollar. On Tuesday, the greenback was low as the DXY dropped to 95.58 levels. The US dollar was experiencing a period of disinterest due to investors' cautious behaviour ahead of the US inflation data. Since the start of November, the Fed has shown interest in tapering the pace of its QE program; now, it has increased tapering to allow a potentially earlier start of a rate hike. Furthermore, the Federal Reserve has also introduced the likelihood of future balance sheet reductions.

All the talk about reducing balance sheets and increasing interest rates has given plenty of demand for the greenback and pushed US yields higher. However, despite the same hawkish points mentioned in the Fed minutes, the dollar has failed to capitalize on much of them. The DXY was down on Tuesday mainly because investors had already priced in this optimism, and now they were probably booking their profits. The reason for the US dollar's decline could be investors' cautious behaviour ahead of the release of US inflation data on Wednesday.

On the data front, at 14:00 GMT, Italian retail sales dropped by 0.4% against the expected 0.3% and weighed on the single currency euro, which further capped gains in the EUR/USD pair. From the US side, at 15:50 GMT, the NFIB Small Business Index remained unchanged at 98.9. At 20:00 GMT, the IBD/TIPP Economic Optimism declined to 44.7 from the anticipated 50.2 and weighed on the US dollar, pushing EUR/USD further higher.

On the flip side, the euro was under pressure on Tuesday, which further capped gains in EUR/USD. On Tuesday, the WHO said that more than half of the people in Europe were projected to catch the Omicron variant by the end of March. The rising spread of the Omicron variant has pushed countries to impose fresh measures and scramble to roll out vaccine booster shots as Europe has become the epicentre of alarming new outbreaks, which says that Omicron could infect half of all people in European countries.

EUR/USD Intraday Technical Levels

Daily Technical Levels

Support Resistance

1.1327 1.1389

1.1288 1.1414

1.1264 1.1452

Pivot Point: 1.1351

EUR/USD - Technical Outlook

On Wednesday, the EUR/USD is trading bullish at the 1.1370 level, violating downward trendline resistance at the 1.1350 level. On the bullish side, the breakout of 1.1350 exposes the EUR/USD pair towards the next resistance level of 1.1413 or 1.1452. Furthermore, the EUR/USD has formed a "Three White Soldiers" pattern supporting the uptrend. Therefore, the bullish bias remains strong above the 1.1350 level. On the flip side, the EUR/USD’s immediate support stays at 1.1350, and below this, 1.1326 or 1.1288 will operate as support. All the best!