EUR/USD Analysis – January 4, 2022

Daily Price Outlook

The EUR/USD pair ended the day at $1.1294 after reaching a high of $1.1381 and a low of $1.1279. The EUR/USD pair turned its momentum to the downside as it entered the New Year, mainly because of the strong US dollar. The US Dollar Index, which measures the greenback's value against a basket of six major currencies, hit a high of 96.33 on Monday. Meanwhile, the US Treasury yield on the benchmark 10-year note was also high as it reached 1.64% after surging by 12 basis points on a single day.

US government bond yields posted massive gains on Monday as investors braced for this year's rate hikes. The Fed has revealed that it wants to raise interest rates three times this year if inflation behaves accordingly, and the traders are optimistic as the year has started and the first rate hike was close. This pushed US yields to post their biggest first-day gain in over a decade and strengthened the dollar, negatively impacting the currency pair EUR/USD.

On the data front, at 13:15 GMT, the Spanish Manufacturing PMI remained flat at 56.2. At 13:45 GMT, the Italian Manufacturing PMI surged to 62.0, against the forecasted 61.6 and supported the euro. At 13:50 GMT, the French final manufacturing PMI surged to 55.6 against the forecasted 54.9 and supported the euro. At 13:55 GMT, the German Final Manufacturing PMI dropped to 57.4 from an estimated 57.9 and weighed on the euro. At 14:00 GMT, the final manufacturing PMI for the whole bloc remained flat at 58.0. Most data from Europe favoured the currency and strengthened the euro, which limited the decline in the EUR/USD pair.

From the US side, at 19:45 GMT, the final manufacturing PMI remained unchanged at 57.7. At 20:00 GMT, construction spending in the US declined in November by 0.4% against an estimated 0.8% and this weighed on the US dollar, which limited the declining prices of the currency pair EUR/USD. Furthermore, the US dollar was also gaining strength from its bets due to its safe-haven status.

According to WHO, the Omicron variant was highly contagious and was spreading quickly all over the globe, which has made the situation worse, and market participants were of the view that governments would have to impose restrictions that they were avoiding previously. This uncertainty exacerbated the risk-off market sentiment, allowing the US dollar to gain strength while weighing on the riskier Euro currency. Additionally, it seems like the greenback was the main driver behind EUR/USD's downward momentum on Monday. The greenback was also getting support from the market as investors were waiting for December's FOMC meeting minutes, which will be released this week.

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 bounced off above the strong support level of 1.1279 and now it’s trading at 1.1302. On the bullish side, the EUR/USD pair’s immediate resistance stays at 1.1317, which is extended by an intraday pivot point level. Further on the higher side, the EUR/USD’s next resistance stays at the 1.1356 or 1.1378 level. The support level holds at around 1.1297 and a break below this level exposes the EUR/USD towards the 1.1257 or 1.1159 support zones. The RSI and Stoch RSI are in support of a selling trend. All the best!