EUR/USD Analysis – January 3, 2022

Daily Price Outlook

The EUR/USD has a sluggish start to 2022, down 0.25 percent intraday around 1.1345 on Monday morning. The currency pair had reached a seven-week high the day before, despite widespread US dollar weakness. However, the market's stabilization during the slow start to the year sparked a corrective fall in the quotation amid mixed worries.

The rising suspicions over the South African COVID version, Omicron, are the primary factors dragging on EUR/USD rates. Covid infections in the bloc and elsewhere are on the rise, casting doubt on the old continent's earlier recovery prospects. According to Reuters, "global infections touched a record high during the past seven days, with an average of a little over a million cases recorded every day between Dec. 24 and 30."

According to the news, "Over 4,000 flights were cancelled throughout the world on Sunday, with more than half of them being US flights, contributing to the toll of holiday week traveling disruptions due to severe weather and the rise in COVID-19 cases,".

The news that China's troubled real-estate giant Evergande has halted operations undermines market sentiment and boosts the US dollar's recovery. Furthermore, the Chinese government has directed the corporation to demolish 39 unauthorized residential constructions. According to Reuters, "China Evergrande Group shares will be stopped from trading on Monday pending the publication of "inside information."

On the plus side, news that Germany will announce tax relief for locals in 2023 combined with studies indicating Omicron as less harsh than prior COVID-19 variations put the EUR/USD bears on the defensive.

Above all, the monetary policy difference between the US Federal Reserve (Fed) and the European Central Bank (ECB) is the most important thing to watch in 2022, as the Fed is anticipated to be moving quicker than the ECB toward monetary policy tightening, which might weigh on EUR/USD values in the future.

Thus, the FOMC Meeting Minutes on Wednesday and the US Nonfarm Payrolls (NFP) on Friday will be critical for pair traders. The final results of the US Markit Manufacturing PMI for December could provide immediate guidance to markets for the day.

EUR/USD Intraday Technical Levels

Daily Technical Levels

Support Resistance

1.1318 1.1401

1.1269 1.1435

1.1235 1.1484

Pivot Point: 1.1350

EUR/USD - Technical Outlook

The EUR/USD is trading with a neutral bias at the 1.1342 level, maintaining a narrow trading range of 1.1300 – 1.1385. Since mid-November, the EUR/USD has taken a step back from the 50-day moving average and a horizontal area containing multiple resistances. Given the bullish MACD indications and the pair's impressive run-up beyond the 21-day moving average, EUR/USD buyers are expected to conquer the immediate hurdle of 1.1390. However, a downward sloping trend line from early September, which was at 1.1440 at the time of publication, will be crucial to watch for the bulls after that. On the other hand, pullback moves may aim for a 21-DMA retest, close to 1.1310 at the very least, before attempting an ascending support line from late November around 1.1250. All the best!