EUR/USD Analysis – January 17, 2022

Daily Price Outlook

During a dull session early Monday morning in Europe, the EUR/USD seesawed around an intraday high of 1.1420. The main currency had lost the most in two weeks the day before, owing to broad US dollar advances, but a US banking holiday and mixed fears appear to have hampered the pair sellers after that. The absence of significant data/events puts EUR/USD traders to the test.

The US Dollar Index (DXY) failed to continue the previous day's U-turn from the lowest levels since November 10, falling 0.02 percent intraday to 95.14. The US dollar's losses were exacerbated further by previously revealed weak US statistics, which harm the US economy and contribute to currency losses. As a result, a weakening US dollar was viewed as one of the primary drivers of higher EUR/USD rates.

The EUR/USD currency pair is trading at the 1.1419 level and consolidating in the range between 1.1400 and 1.1423. Despite the lack of important data/events from the US for the day, the market's trading mood did not improve from its dismal overnight performance, and trades stayed in the red for the day. On the other hand, the market reacted to concerns about the coronavirus and a Fed rate hike. China's Beijing tightens entry regulations after experiencing more than 20,000 daily infections for the third day in a row, while Japan contemplates heightened virus-related constraints for Tokyo. On the other hand, Australia is in the midst of its fourth day of easy daily COVID infections, with a current total of around 65,000.

During a hearing before the Senate Banking Committee last week, Fed Chairman Jerome Powell stated that the US economy is ready to begin tightening monetary policy. According to other Fed members, interest rates will most likely be hiked in March 2022. The Fed will make its next policy decision on January 25-26, while the Bank of England will decide on February 3. Concerns about the Fed's rate hike grew even stronger after Federal Reserve Bank of San Francisco President Mary Daly and New York Fed President John Williams on Friday. As a result of the speculation about faster Fed rate hikes, the EUR/USD price rose.

Furthermore, the market's losses were bolstered by weak US economic statistics for December, which might help EUR/USD prices even more by weakening the US dollar. As a result, retail sales in the United States fell 1.9 percent year on year, while sales in the comparison group fell 3.1 percent. "The results suggest that the highest inflation in 40 years is influencing consumer behaviour," ANZ Bank analysts explained. "This may easily extend into the first quarter when the expiration of child tax credits would also weigh." In addition, manufacturing fell 0.3 percent from the previous year. In contrast, industrial production fell 0.1 percent year on year. According to ANZ Bank analysts, "a 1.3 percent decline in auto vehicles and parts led to manufacturing weakness."

ECB President Christine Lagarde, on the other hand, reaffirmed the regional central bank's willingness to maintain price stability. Comments like "monetary accommodation are still needed for inflation to stabilize at the 2.0 percent objective over the medium term," however, appear to have given the Fed the upper hand in the ECB vs. Fed debate.

German Bund yields will be watched for clarity despite the lack of important data or events. For instance, the EUR/USD may remain under pressure due to higher bund yields, but the risk catalyst should be monitored for new momentum. Recently, virus numbers in the United States, the United Kingdom, and Europe have declined from record highs, calming Omicron worries and putting a floor under pair pricing. In addition, virus updates and Fed rate hike anxieties have become the most important factors.

EUR/USD Intraday Technical Levels

Daily Technical Levels

Support Resistance

1.1405 1.1426

1.1391 1.1435

1.1370 1.1456

Pivot Point: 1.1413

EUR/USD - Technical Outlook

The EUR/USD pair reversed course after reaching its highest level since November 11 the day before. The drop could be attributed to Thursday's Doji candlestick pattern underneath the 100-day EMA, and the RSI's retreat. As a result, the EUR/USD pair's recent weakness is anticipated to extend into 1.1380, where the 50-day EMA and the resistance-turned-support line from September 03 meet. The repeated high marked since November 16 have also added to the strength of the 1.1380 support. Alternatively, the EUR/USD pair's short-term comeback is guarded by the 100-day EMA level of 1.1483 and the 1.1500 level. All the best!