Euro Still Holding Support at 1.1335 – 1.1300

The Euro is trading lower against the U.S. Dollar on Thursday after giving back earlier gains. Traders seemed to shrug-off the Euro Zone December inflation report that confirmed a record 5.0 rate amid an energy surge.

The choppy trade the last two days suggests investors may already be preparing for next week’s U.S. Federal Reserve meeting. At this meeting, policymakers are expected to lay out their plans for ending quantitative easing and implementing their first rate hike.

At 13:06 GMT, the EUR/USD is trading 1.1337, down 0.0007 or -0.06%. On Thursday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $105.44, up $0.30 or +0.28%.

Euro Zone consumer prices jumped at a record high pace in December, the EU’s statistics agency confirmed Thursday, boosted by a surge in energy prices and supply chain bottlenecks as the economy recovers from pandemic lockdowns.

The European Union’s statistics office Eurostat said consumer prices in the 19 countries sharing the Euro rose 0.4% month-on-month in December for a 5.0% year-on-year jump, the same as the initial estimate published on January 7.

Daily EUR/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum has been trending lower since the formation of the closing price reversal top on January 14.

A trade through 1.1272 will change the main trend to down. A move through 1.1483 will negate the closing price reversal top and signal a resumption of the uptrend.

The short-term range is 1.1186 to 1.1483. The EUR/USD is currently testing its retracement zone at 1.1335 to 1.1300.

The minor range is 1.1483 to 1.1315. Its 50% level at 1.1399 is the nearest resistance.

The main range is 1.1692 to 1.1186. Its retracement zone at 1.1439 to 1.1499 is resistance. It stopped the rally at 1.1483.

Near-Term Outlook

The near-term direction of the EUR/USD is likely to be determined by trader reaction to 1.1335 and 1.1300.

Bullish Scenario

A sustained move over 1.1335 will indicate the presence of buyers. If this move creates enough upside momentum then look for a surge into 1.1399.

Bearish Scenario

A sustained move under 1.1335 will be the first sign of weakness. Taking out 1.1300, however, could trigger a quick break into the main bottom at 1.1272.

A move through 1.1272 will change the main trend to down. This could trigger a further break into a pair of main bottoms at 1.1235 and 1.1222.

For a look at all of today’s economic events, check out our economic calendar.

EUR/UDS Goes For 1.1420 Initially

EUR/USD Technical Analysis

  • EUR/USD trend is changing
  • Move up is expected
  • Above 1.1360 stronger move
  • 1.1519 final target

H4 CHART EUR/USD

  1. Swing low
  2. Double top
  3. Bounce zone
  4. Final target

The Eurozone preliminary CPI came out +5.0% vs +4.7% y/y expected. The CPI presents the change in the price of goods and services purchased by consumers. Inflation is important to currency valuation because rising prices lead the central bank to raise interest rates out of respect for their inflation containment mandate. The EUR/USD should bounce from 1.1330 area towards 1.1360. Above 1.1360 stronger momentum should kick in and the next target is 1.1420. The final target is 1.1519. We don’t think we should see 1.1519 without a fundamental driver, in this case next week FED. But the focus is on the move up and 1.1420.

For a look at all of today’s economic events, check out our economic calendar.

Cheers and safe trading,

Nenad

 

Economic Data from the Eurozone Deliver Mixed Results for the EUR

It was a busier day on the Eurozone economic calendar. Finalized December inflation figures for Eurozone and German wholesale inflation figures were in focus.

Eurozone Inflation

In December, the Eurozone’s annual rate of inflation picked up from 4.9% to 5.0%, which was in line with prelim figures.

Month-on-month, consumer prices increased by 0.4%. This was also in line with prelim figures. In November, consumer prices had also risen by 0.4%.

According to Eurostat,

  • A year earlier the Euro area’s annual rate of inflation was -0.3%.
  • The lowest annual rates of inflation were registered in Malta (2.6%) and Portugal (2.8%).
  • Estonia (12.0%) registered the highest annual rate of inflation, followed by Lithuania (10.7%).
  • The highest contribution to the annual euro area inflation rate came from energy (+2.46 percentage points), followed by services (+1.02 pp), non-energy industrial goods (+0.78 pp), and food, alcohol, & tobacco (+0.71 pp).

German Wholesale Inflation

In December, Germany’s annual wholesale rate of inflation accelerated from 19.2% to 24.2% versus a forecasted 19.4%.

Month-on-month, Germany’s PPI jumped by 5.0% versus a forecasted 0.8%. In November, the PPI rose by 0.8%.

According to Destatis,

  • Year-on-year, the increase was the highest ever.
  • Compared with December 2020, energy prices were up 69% and up by 15.7% compared with November 2021.
  • Strong price increases of natural gas (distribution) and electricity drove energy prices.
  • Excluding energy, the overall index was up 10.4% up on December 2020.
  • Prices of intermediate goods increased by 19.3%, while prices of non-durable consumer goods rose by 4.7% compared with December 2020.

Market Impact

Ahead of today’s stats, the EUR had fallen to a pre-stat low $1.13456.

In response to Germany’s stats, the EUR rose to a post-stat and current day high $1.13690. Following the release of the Eurozone’s inflation numbers, however, the EUR fell to a post-stat and current-day low $1.13331.

At the time of writing, the EUR was down by 0.05% to $1.13372.

EURUSD 200122

Next Up

The ECB’s monetary policy meeting minutes will be in focus ahead of jobless claims and Philly FED Manufacturing numbers from the U.S.

From the minutes, the markets will be looking for any chatter on inflation and interest rates.

EUR/USD Tests Resistance At 1.1365

Euro Moves Higher Against U.S. Dollar

EUR/USD is currently trying to settle above the resistance at the 50 EMA at 1.1365 while U.S. dollar is under pressure against a broad basket of currencies.

The U.S. Dollar Index has recently managed to get below the 50 EMA at 95.55 and is moving towards the support level at 95.40. In case the U.S. Dollar Index declines below this level, EUR/USD will get more support.

Today, foreign exchange market traders will focus on the final reading of inflation reports from EU. Analysts expect that Euro Area Inflation Rate increased by 0.4% month-over-month in December. On a year-over-year basis, Inflation Rate is projected to grow by 5%. Core Inflation Rate is expected to increase by 2.6%.

Typically, final readings show the same data as preliminary readings, but traders should keep in mind that any surprise would have a significant impact on EUR/USD dynamics.

I’d also note that the yield of the 10-year German government bonds continues its attempts to settle above the 0.00% level. Yields have been negative since early 2019, and a move back into the positive territory may provide additional support to the European currency.

Technical Analysis

eur usd january 20 2022

EUR/USD is testing the resistance at the 50 EMA at 1.1365. In case this test is successful, EUR/USD will move towards the next resistance level which is located at 1.1400.

A move above 1.1400 will push EUR/USD towards the resistance at 1.1425. If EUR/USD gets above this level, it will head towards the next resistance level at 1.1450.

On the support side, the nearest support level for EUR/USD is located at 1.1330. If EUR/USD manages to settle back below this level, it will head towards the next support at 1.1300. A successful test of this support level will open the way to the test of the next support which is located at January lows at 1.1270.

For a look at all of today’s economic events, check out our economic calendar.

Economic Data Puts the EUR and the Greenback in Focus

Earlier in the Day:

It is a busy start to the day on the economic calendar this morning. The Japanese Yen and the Aussie Dollar were in focus in the early hours. Later this morning, the PBoC will also be in action.

For the Japanese Yen

In December, Japan’s trade deficit narrowed from ¥955.6bn to ¥582.4bn. Economists had forecast a narrowing to 784.1bn.

According to figures released by the  Ministry of Finance,

  • Year-on-year, exports rose by 17.5%, while imports were up by 41.1%.
  • Exports to China increased by 10.8%, with exports to the U.S up by 22.1%.
  • From China, imports rose by 20.5%, with imports from the U.S increasing by 39.6%.
  • Imports from Australia surged by 95.7% when compared with December 2020.

The Japanese Yen moved from ¥114.350 to ¥114.359 upon release of the figures. At the time of writing, the Japanese Yen was up by 0.02% to ¥114.310 against the U.S Dollar.

For the Aussie Dollar

Employment figures were in focus this morning.

According to the ABS,

  • Employment increased by 64.8k in December, following a 366.1k jump in November.
  • Full employment rose by 41.5k after having risen by 128.3k in the previous month.
  • As a result, Australia’s unemployment rate fell from 4.6% to 4.2%. This was the lowest unemployment rate since August 2008.
  • The participation rate held steady at 66.1% in the month.

The Aussie Dollar moved from $0.72207 to $0.72267 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.24% to $0.7228.

Elsewhere

At the time of writing, the Kiwi Dollar was down by 0.13% to $0.6775.

The Day Ahead

For the EUR

It’s a busier day ahead on the economic calendar. Finalized December inflation figures for the Eurozone and German wholesale inflation figures are due out later today. Expect both sets of numbers to draw interest as market jitters over inflation continue to drive the markets

On the monetary policy front, the ECB monetary policy meeting minutes are also due out and will be key. The markets will be looking for any chatter on inflation and interest rates.

At the time of writing, the EUR was up by 0.07% to $1.1351.

For the Pound

It’s a particularly quiet day ahead on the economic calendar. There are no major stats due out of the UK to provide the Pound with direction.

At the time of writing, the Pound was up by 0.05% to $1.3619.

Across the Pond

It’s a busier day ahead. Key stats include the weekly jobless claims and Philly FED Manufacturing Index numbers for January. Another rise in jobless claims could test support for riskier assets.

At the time of writing, the U.S Dollar Spot Index was up by 0.05% to 95.562.

For the Loonie

It’s a quiet day ahead, with no major stats due out of Canada to provide the Loonie with direction. The lack of stats will leave the Loonie in the hands of crude oil prices on the day.

At the time of writing, the Loonie was up by 0.09% to C$1.2504 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

January 20th 2022: Technical Outlook

Charts: Trading View

(Italics: Previous Analysis Due to Limited Price Change)

EUR/USD:

Weekly timeframe:

Long-standing resistance from $1.1473-1.1583 (active S/R since late 2017) entertained a bearish showing last week, with this week currently underwater by 0.6 percent. Familiar support resides at $1.1237-1.1281. Made up of a 61.8% Fibonacci retracement at $1.1281 and a 1.618% Fibonacci projection from $1.1237, this area, as you can see, delivered a floor heading into the close of 2021. ‘Harmonic’ traders will acknowledge $1.1237 represents what’s known as an ‘alternate’ AB=CD formation (extended D leg).

Strengthening the aforementioned resistance area’s presence, EUR/USD took out 2nd November low (2020) at $1.1603 in late September (2021), suggesting a downtrend on the weekly timeframe. This is reinforced by the monthly timeframe’s long-term (some would say ‘primary’) downtrend since mid-2008.

Daily timeframe:

Joining the lower edge of weekly resistance at $1.1473-1.1583, price recently whipsawed above a 7-month trendline resistance, extended from the high $1.2254, established by way of a bearish engulfing candle (a reversal pattern in which focus is directed to the real candle body rather than upper and lower shadows). Despite a mild recovery attempt on Wednesday, sellers continue to have the upper hand. Should bearish follow-through emerge, Quasimodo support offers an obvious target at $1.1213.

Momentum studies, taken from the relative strength index (RSI), has the indicator’s value hugging the 50.00 centreline, following a near-test of resistance at 63.66 last week. Crossing under the 50.00 centreline (average losses outweighing average gains: negative momentum) will help validate the near-term bearish landscape.

Trend on this scale has also been lower since June 2021.

H4 timeframe:

Discovering a floor ahead of 11th January low $1.1313, and two neighbouring trendline supports (drawn from the low $1.1186 and $1.1235), subsequent movement led the candles to resistance at $1.1354-1.1379—a prior decision point positioned a handful of pips beneath resistance at $1.1382.

Although $1.1354-1.1379 is in ‘agreement’ with higher timeframe direction, traders are urged to consider the possibility of a whipsaw to resistance at $1.1382 (or even the decision point located between $1.1435 and $1.1399) before sellers attempt to make a show.

H1 timeframe:

The technical framework out of the H1 chart exposes demand-turned supply from $1.1363-1.1375 and intersecting trendline resistance, extended from the high $1.1483. Couple this area with H4 resistance underlined above at $1.1354-1.1379, a bearish narrative may develop from here.

In terms of where we stand on the relative strength index (RSI) at the moment, the value is circling the 50.00 centreline after rebounding from oversold. Resistance derived from this mid-point adds confluence to the aforementioned price resistances.

Observed Technical Levels:

The weekly timeframe coming from resistance at $1.1473-1.1583, together with the daily timeframe holding south of trendline resistance, throws positive light on H4 resistance at $1.1354-1.1379 which holds H1 supply within at $1.1363-1.1375.

Downside targets from the noted H4 and H1 zones is $1.13 on the H1, followed by the upper edge of weekly support at $1.1281.

AUD/USD:

Weekly timeframe:

Prime support at $0.6968-0.7242 continues to play a crucial role on the weekly timeframe. Bulls, as you can see, embraced a modestly bullish stance into the close of 2021. 2022, on the other hand, has been undecided so far. Should buyers continue pressing higher, resistance is formed at $0.7501. Manoeuvring beneath $0.6968-0.7242 reveals support at $0.6673 and a 50.0% retracement at $0.6756.

Since mid-Feb 2021, a modest downside bias has been seen. This followed higher prices since pandemic lows of $0.5506 (March 2020). However, it is important to note that from the monthly timeframe the unit has been entrenched within a large-scale downtrend from mid-2011.

Daily timeframe:

Following the near-test of resistance between $0.7416 (the 200-day simple moving average) and $0.7315 (a 100% Fibonacci projection), the unit clocked a low of $0.7170 on Tuesday and printed a noticeable comeback on Wednesday.

Aside from the $0.7130 low (7th January) and the $0.7082 (20th December [2021]) low, obvious support at $0.7021 calls for attention in the event sellers regain control.

The relative strength index (RSI) continues to circle the 50.00 centreline. $0.7416-0.7315 sellers, therefore, will likely be watching for the indicator to secure position beneath the 50.00 neighbourhood, movement informing market participants that average losses exceed average gains.

H4 timeframe:

AUD/USD bulls entered an offensive phase out of $0.7169-0.7187 demand yesterday (sat just above Quasimodo support from $0.7146), elevating the currency pair to within close proximity of resistance at $0.7250. Beyond resistance, price is likely to readdress prime resistance at $0.7323-0.7308.

H1 timeframe:

Leaving Quasimodo support at $0.7168 unchallenged, London’s morning session on Wednesday witnessed price reclaim $0.72+ status and whipsaw above local (double-top) peaks at $0.7229 to touch gloves with a moderate decision point at $0.7254-0.7238 as we entered US trading. Note that this area houses the H4 resistance at $0.7250 within its upper boundary.

The relative strength index (RSI), in line with price movement greeting the decision point, touched overbought space and, as of writing, is attempting to drop through 60.00.

Observed Technical Levels:

The H1 decision point at $0.7254-0.7238 and converging H4 resistance from $0.7250 are likely to offer sellers something to work with, targeting $0.72 on the H1 and the upper limit of H4 demand at $0.7187. The bearish reading is largely based on the lack of buying out of weekly prime support at $0.6968-0.7242 and recent reaction from daily resistance between $0.7416-0.7315.

USD/JPY:

Weekly timeframe:

After touching gloves with a 1.272% Fibonacci projection from ¥116.09 in the shape of a shooting star and refreshing multi-year pinnacles, USD/JPY tumbled 1.2 percent last week. While modest recovery efforts developed in recent trading, sellers remain at the wheel with the path of least resistance towards support at ¥112.16.

In terms of trend, the unit has been advancing since the beginning of 2021, welcoming a descending resistance breach, drawn from the high ¥118.61. In consideration of the trend, a dip-buying theme from ¥112.16 is a reasonable assumption.

Daily timeframe:

Tuesday settling in the shape of a shooting star candlestick formation attracted a bearish following on Wednesday.

The technical framework to be mindful of on this chart has Quasimodo resistance to target at ¥116.33, whereas downstream shines light on demand at ¥112.66-112.07, tailed closely by a decision point from ¥111.18-111.79 and the 200-day simple moving average at ¥111.40.

In terms of the relative strength index (RSI), support between 40.00 and 50.00 (a ‘temporary’ oversold range since 10th May) remains active.

Much like the weekly timeframe, trend on the daily scale points to the upside.

H4 timeframe:

Quasimodo support-turned resistance at ¥114.71 elbowed into the frame Tuesday and, held a bearish vibe on Wednesday. Pursuing lower prices highlights a familiar decision point at ¥113.54-113.78, set a few pips above Quasimodo support at ¥113.22.

H1 timeframe:

The ¥115 reaction shows limited support until reaching ¥114. However, ¥114 also advertises itself as a weak level exhibiting little confluence to write about. Beyond the round number, Quasimodo support sits at ¥113.64, closely shadowed by two support levels at ¥113.34 and ¥113.56.

Also worth noting is the relative strength index (RSI) nearing oversold terrain after retesting the lower side of the 50.00 centreline.

Observed Technical Levels:

Keeping it simple, chart studies indicate a ¥114 breach on the H1 timeframe. Short-term players are likely to take aim at H1 Quasimodo support at ¥113.64, and perhaps support at ¥113.34 and ¥113.56.

GBP/USD:

Weekly timeframe:

The current 4-week bid—initiated ahead of the double-top pattern’s ($1.4241) profit objective around $1.3093 (red boxes)—is echoing a mildly weaker tone this week, down 0.3 percent. ‘Consumed supply’ (blue area) is nearby between $1.4001 and $1.3830. Considering this, candle action may still be guided as far north as resistance from $1.4371-1.4156 in the coming weeks.

In regards to trend, the weekly timeframe’s position shows higher prices since early 2020. However, it’s important to recognise that while the trend on the weekly timeframe demonstrates an upside bias, the monthly timeframe’s long-term trend has been lower since late 2007.

Daily timeframe:

Three back-to-back daily bearish candles delivered the currency pair to support at $1.3602, deriving technical impetus from the lower side of the 200-day simple moving average at $1.3731. Drawing a bid from current support on Wednesday knocked some of the wind out of the GBP decline and underscores the prospect of a bullish challenge.

Below $1.3602 re-opens the door for a return to neighbouring trendline resistance-turned support, taken from the high $1.4250.

Momentum, according to the relative strength index (RSI), is seen attempting to regain some poise around the 60.00ish region. Though rupturing this number casts light on the 50.00 centreline.

H4 timeframe:

Wednesday settled around resistance at $1.3622-1.3646—plotted just south of resistance at $1.3668—and provided candlestick enthusiasts a shooting star formation, generally recognised as a bearish signal. If sellers take control, aside from a number of ‘local’ lows, demand is visible at $1.3428-1.3444.

However, by entering short at this point, traders are effectively selling into daily support from $1.3602. Conservative traders, therefore, may elect to wait for a price close beneath $1.36.

H1 timeframe:

Following a whipsaw under $1.36, Quasimodo support stepped in at $1.3580 and encouraged a bid back over $1.36 and also pulled the relative strength index (RSI) above the 50.00 centreline. Note the latter is set to be retested as support.

Resistance calls for attention around $1.37, a psychological barrier that’s served well as support and resistance since early November 2021.

Observed Technical Levels: 

The daily timeframe is seen testing support at $1.3602; the H4 timeframe is seen testing a resistance area at $1.3622-1.3646, and the H1 appears poised to revisit $1.36.

The above presents a difficult trading picture, technically speaking. As a result, traders are likely to wait and see if H1 can punch through $1.36 and H1 Quasimodo support at $1.3580 before taking a bearish position, targeting H1 support at $1.3533 and $1.35 (aligns closely with the daily timeframe’s trendline resistance-turned support, taken from the high $1.4250).

In terms of long positions, technicians are likely to want to see a price close above H4 resistance at $1.3668 form, clearing space to $1.37 on the H1.

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Euro Trying to Build Support Base at 1.1335 – 1.1300

The Euro is edging higher at the mid-session as the U.S. Dollar weakened after U.S. Treasury yields reversed an earlier rise. The 10-year U.S. Treasury yield hit 1.9% on Wednesday, its highest point since December 2019, after retreating.

The yield on the benchmark 10-year Treasury note moved nearly 2 basis points lower to 1.85% at around 16:00 GMT, after hitting 1.904% earlier. The yield on the 30-year Treasury bond fell 1 basis point to 2.174%.

At 16:55 GMT, the EUR/USD is trading 1.1343, up 0.0016 or +0.14%. The Invesco CurrencyShares Euro Trust ETF (FXE) is at $105.46, up $0.32 or +0.30%.

Overseas, the European Central Bank (ECB) is currently behind on its normalization path, compared to the Fed and the Bank of England, but surging inflation and wider moves in the global bond market have now helped to push yields above zero.

In the U.S., homebuilding increased to a nine-month high in December amid a surge in multi-family housing projects, but soaring prices for materials after the government  nearly doubled duties on imported Canadian softwood lumber could hamper activity.

Housing starts rose 1.4% to a seasonally adjusted annual rate of 1.702 million units last month, the highest level since March.

The volatile multi-family housing segment accounted for the rise in homebuilding last month, with starts for buildings with five units or more surging 13.7% to a rate of 524,000 units.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has been trending lower since the formation of the closing price reversal top on January 14.

A trade through 1.1272 will change the main trend to down. A move through 1.1483 will signal a resumption of the uptrend.

The short-term range is 1.1186 to 1.1483. Its retracement zone at 1.1335 to 1.1300 is support. This zone stopped the selling on Tuesday at 1.1315.

The minor range is 1.1272 to 1.1483. Its 50% level at 1.1377 is potential resistance.

The main range is 1.1692 to 1.1186. Its retracement zone at 1.1439 to 1.1499 is resistance. This zone stopped the buying at 1.1483 on January 14.

Short-Term Outlook

The short-term direction of the EUR/USD is likely to be determined by trader reaction to 1.1335 and 1.1300.

Look for the upside bias to resume on a sustained move over 1.1335. Meanwhile, the downside momentum is likely to continue on a sustained move under 1.1300.

For a look at all of today’s economic events, check out our economic calendar.

Key Milestones of the Financial Market in 2021

The year 2021 was packed with exciting developments and meaningful circumstances in world affairs—its economy, politics, and policies—impacting the financial sector as a whole. With the help of its analytics team, the international Forex broker OctaFX compiled a basic rundown to deliver some of the more critical, vital events which it deemed especially important.

The U.S. dollar’s tumultuous journey through quantitative easing (QE)

During the COVID-19 crisis, the U.S. Federal Reserve (Fed) and the European Central Bank (ECB)—the central banks that issue the world’s reserve currencies—flooded the financial markets with new money. The official reason stated was helping the suffering economy because of the pandemic.

Therefore, U.S. president Joe Biden’s proposal of a 1.9 trillion USD stimulus package to Congress arrived on 21 January. The Republican Party was highly sceptical about this approach—some congressmen even recalled the already worrying, continual growth of the national debt (a mass total of 21.6 trillion USD at the time). It is a long-term development whose lack of resolution as of yet does not shake the market’s firm belief in the reliability of the U.S. dollar.

Biden follows suit by signing stimulus plan

Fast forward two months, the U.S. Senate (6 March) and the U.S. House of Representatives (10 March) both approved the stimulus plan before Biden signed it on 11 March as a 1.9 trillion USD economic rescue package. Far from being a bipartisan undertaking, no Republican approved the new order. Although, the document was amended, for example, the clause on raising the minimum wage was removed. New money flooding the market like this filled most market participants with a bullish sentiment.

Another 1.2 trillion USD for ‘infrastructure spending plan’

Towards the end of June 2021, expectations for a tight monetary policy were running high but then the U.S. Senate agreed on and approved a new ‘infrastructure spending plan’, totalling another 1.2 trillion USD. The reason was a sharp increase in inflation in the months prior to June.

Both institutions—the Fed and the ECB—have kept rates at zero or negative and implemented quantitative easing (QE) throughout 2021, increasing their balance sheets and buying bonds with that money. Because of this, their yields fell, which encouraged investors to put capital into companies’ stocks and look for other projects.

Fed announces the end of bailout measures

In September, the U.S. Federal Reserve officially declared that it is ready to end its quantitative easing programme and may raise the base rate already from 2022 rather than 2023, as previously assumed. The Fed further added it would continue to buy 120 billion USD worth of assets each month for the time being: 80 billion USD in treasuries and 40 billion USD in mortgage-backed bonds.

The regulator’s rhetoric initially spooked investors, but overseas markets moved higher on 23 September. The American S&P 500 was recovering from a marginal fall and rose by 1%. Finally, the U.S. monetary regulator started winding down asset purchases from the market to 105 billion USD in November (from 120 billion USD previously) and to 90 billion USD in December—strong signals for the market that the economy starts to revitalise itself.

Bitcoin reaches historic ATH in April before falling again by 53%

The whole of April, the crypto industry radiated with enthusiasm over an ongoing bull market before bitcoin—surprisingly to most—started a steep correction from a historical all-time high of 63,500 USD (13 April 2021) to 34,600 USD (29 May 2021). In those first initial waves downward, due to triggered margin calls, around 8 billion USD in position liquidations took place. This process had put most of the trading community on a new kind of alertness.

This downtrend continued up to 20 July 2021, reaching a price of 29,600 USD per bitcoin (that’s over 53% from the previous all-time high). Only after that point did an uptrend start with a late-summer high of 52,600 USD (6 September 2021). Most were sure the bottom for bitcoin back then had been hit and more frequent but careful trading resumed during that time.

Ethereum stays strong but stable while bitcoin tops twice more

Six weeks later, the mother of all cryptocurrencies topped off its previous all-time high twice in close succession—65,990 USD (20 October 2021) and 67,500 USD (8 November 2021), vindicating a suspected bull market across market observers, retail investors, and legacy institutions once again. All the while, the altcoin market soldiered on with a fluctuating performance, seeing Ethereum’s persistence and some success stories such as the Solana smart-contract platform.

The latter rose from 1.84 USD on 1 January to its all-time high of 258.93 USD on 6 November, gaining 13,972%. Many opportunities for lucrative trades and initial long-term investments were realised. At the same time, some solid altcoin projects stagnated during this period, only showing that their turn for growth has yet to come.

U.S. and E.U. prioritise the basic materials sector

In autumn, the E.U. and the U.S. have agreed to suspend duties on steel and aluminium products. During a speech, the President of the European Commission, Ursula von der Leyen, stressed that her institution planned to develop proposals to suspend duties imposed on goods from the U.S. She elaborated that this would bring trade in steel and aluminium products back to their levels before these tariffs were imposed in 2018.

U.S. President Joe Biden reiterated the intentions of the European Union and the United States jointly committing to a carbon-based agreement on steel and aluminium trade. After President Trump’s era of ‘economic isolationism’, many investors in the relevant industries understood this development as a bullish long-term sign.

European Union at a crossroads

In 2021’s fourth quarter, the euro fell to its lowest value since the start of July 2020. The reason for the plunge was the worsening business climate in the E.U.

In Germany, supply problems within most industries have worsened. Berlin, as the fourth-biggest economy in the world, also inaugurated its new government in December. One important aim of the new coalition is to introduce a wide variety of new taxes on secondary homeownership and carbon emissions on all levels, be it corporate or private. Germany is a major player in the European Union’s power dynamics structure. Its new government in Berlin will have much to say about the way onwards in terms of the continent’s financial and political development.

What the future holds

As Powell hinted throughout the year, in January 2022 there will be a monthly quantitative easing cap of 60 billion USD, halving the 2021 rate and initiating a probable and gradual farewell to the emergency policy. A process that market participants of all shapes and sizes (private and corporate) will have to pay close attention to.

All of the dynamics above will have exciting new developments in 2022 and the years after—many of which will hit most by surprise. So, financial education and constant research and training towards economic and financial literacy are paramount to navigating through these fast-paced markets. This plain truth applies just as much to Foreign Exchange as it does to the stock market or the cryptocurrency domain.

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Euro bounces from low levels

The Euro has rallied a bit during the trading session on Wednesday to show signs of life after what was a horrible Tuesday. Because of this, it looks as if we are trying to find support in the middle of the previous consolidation phase, which does make a certain amount of sense even though we had sold off so drastically during the previous session. Keep in mind that yields in America continue to spike, and as they took off during the day on Tuesday, the US dollar strengthened against almost everything.

EUR/USD Video 20.01.22

All of that being said, we did not break down below the bottom of the consolidation area, so it does make a certain amount of sense that we would continue to see buyers coming back into the picture. If we can break back above the 50 day EMA that I would consider this to be a situation where support held, and we could go higher. Until then, I am a bit suspicious and cautious, and would have to watch the US dollar across the market in order to feel comfortable either buying or selling.

Nonetheless, this is a market that I think will have to make a bigger decision, probably based upon bond markets. After all, the German Bund managed to go positive as far as yields are concerned, which is something that we have not seen in a couple of years. This of course made the Euro a bit more attractive, but at this point I think the only thing you can count on is a ton of noisy behavior over the next couple of weeks as we try to sort things out.

For a look at all of today’s economic events, check out our economic calendar.

German Inflation Figures for December Provides Little EUR Support

It was a quieter day on the Eurozone economic calendar. Finalized December inflation figures for Germany were in focus ahead of the European open.

In December, German consumer prices rose by 0.5%, which was in line with prelim figures. Consumer prices had fallen by 0.2% in the month of November.

According to Destatis,

  • In December, the annual rate of inflation picked up from 5.2% to 5.3%, which was in line with forecasts.
  • The annual average rate of inflation was 3.1% compared with 2020, which was also in line with forecasts.

Reasons for High Inflation Rate in 2021 on 2020

  • A temporary reduction of value added tax rates in the 2nd half of 2020 and a sharp decline in mineral oil product prices in the previous year reportedly had an upward effect.
  • More and more crisis-related effects, such as delivery bottlenecks and marked price increases at upstream stages in the economic process.

Prices of Energy Products up on an Annual Average in 2021

  • The prices of energy products were up by 10.4% in 2021 year-on-year.
  • In 2020, prices of energy products had fallen by 4.8%.

Other Contributory Factors

  • Food prices rose 3.2% in 2021 compared with 2020.
  • Prices of goods increased by 4.3%, while service prices increased by just 2.1%.

Market Impact

Ahead of today’s stats, the EUR had fallen to a pre-stat and current day low $1.13190 before rising to a pre-stat high $1.13364.

In response to today’s stats, the EUR rose to a post-stat and current day high $1.13429 before falling to a post-stat low $1.13291.

At the time of writing, the EUR was up by 0.05% to $1.13323.

190122 EURUSD Hourly Chart

Next Up

Housing sector data from the U.S that should have a muted impact on the EUR. ECB member McCaul is scheduled to speak, however, which could draw some interest.

EUR/USD Found Support Near 1.1330

Euro Tries To Rebound Against U.S. Dollar

EUR/USD is currently trying to settle back above 1.1330 while U.S. dollar is losing some ground against a broad basket of currencies.

The U.S. Dollar Index is currently stuck in the range between the support at the 50 EMA at 95.60 and the resistance at the 20 EMA at 95.70. In case the U.S. Dollar Index manages to settle above the 20 EMA, it will move towards the resistance at the 96 level which will be bearish for EUR/USD.

Yesterday, EU reported that ZEW Economic Sentiment Index improved from 26.8 in December to 49.4 in January compared to analyst forecast of 29.5.

Today, foreign exchange market traders will have a chance to take a look at Building Permits and Housing Starts reports from U.S. Analysts expect that Building Permits increased by 0.4% month-over-month in December. Housing Starts are projected to decline by 2% month-over-month.

Traders will also monitor the developments in U.S. government bond markets. Treasury yields continue to move higher, which may provide more support to the U.S. dollar. It should be noted that the current move is very strong. Just several trading sessions ago, the yield of 2-year Treasuries was 0.90%, and it is currently trying to settle above 1.07%.

Technical Analysis

eur usd january 19 2022

EUR/USD received support near 1.1330 and is trying to rebound. The next resistance level for EUR/USD is located at 1.1350.

If EUR/USD manages to settle above this level, it will get to the test of the resistance at the 50 EMA at 1.1365. A move above the 50 EMA will open the way to the test of the resistance at 1.1400.

On the support side, EUR/USD needs to settle below 1.1330 to continue its pullback. The next support level for EUR/USD is located at 1.1300.

If EUR/USD declines below 1.1300, it will head towards the support which is located at 1.1270. A move below this level will push EUR/USD towards the support at 1.1230.

For a look at all of today’s economic events, check out our economic calendar.

UK Inflation and Central Bank Chatter Puts the Pound back in the Spotlight

Earlier in the Day:

It is a relatively busy start to the day on the economic calendar this morning. The Kiwi Dollar and the Aussie Dollar were in action in the early hours.

For the Kiwi Dollar

Electronic card retail sales increased by a modest 0.4% in December, following a 9.6% jump in November.

According to NZ Stats,

  • Easing COVID-19 restrictions and the Christmas holidays supported another increase in card spending.
  • While total retail card spending rose by just 0.4%, spending on services jumped by 16.6%.
  • Within the retail industries, spending on fuel led the way, rising by 4.2%.
  • Spending on durables and consumables bucked the trend, however, falling by 7.2% and by 0.1% respectively.
  • The sharp fall in durable spending was attributed to higher spending in November that had coincided with Black Friday sales.

The Kiwi Dollar moved from $0.67695 to $0.67668 upon release of the figures. At the time of writing, the Kiwi Dollar was down by 0.06% to $0.6766.

For the Aussie Dollar

The Westpac Consumer Sentiment Index fell by 2% to 102.2 in January. In December, the Index had fallen by 1.0% to 104.3. Economists had forecast a 0.3% decline.

According to the latest Westpac Report,

  • The 2% decline, attributed to the Omicron strain, was modest when compared with the Delta strain driven 5.2% slide.

Looking at the sub-components:

  • Family finances vs a year ago increased by 7.5% to 95.6, while family finances next 12-months fell by 2.8% to 108.1. In spite of the decline the sub-index held above a long run average of 107.5.
  • Economic conditions next 12-months fell by 9.6% to 94.8, with economic conditions next 5-years falling 6.1% to 103.6. Both continued to sit above their long run averages of 91.1 and 91.9 respectively.
  • In spite of the negative sentiment, the time to buy a major household item rose by 2.8% to 108.9. (Long run average: 126.5).
  • The time to buy a dwelling sub-index rose by 6.3% to 87.0, while the Unemployment Expectations Index increased 8.2% to 112.7.

The Aussie Dollar moved from $0.71871 to $0.71850 upon release of the figures. At the time of writing, the Aussie Dollar was down by 0.10% to $0.7178.

Elsewhere

At the time of writing, the Japanese Yen was down by 0.08% to ¥114.700 against the U.S Dollar.

The Day Ahead

For the EUR

It’s a quieter day ahead on the economic calendar. Finalized December inflation figures for Germany are due out later today. Expect any revisions to prelim figures to influence. On the monetary policy front, ECB McCaul is scheduled to speak.

At the time of writing, the EUR was up by 0.01% to $1.1326.

For the Pound

It’s another particularly busy day ahead on the economic calendar. December inflation figures are due out today. Persistent inflationary pressures could force the BoE to signal a 2nd rate hike in the coming months. The stats precede scheduled speeches from BoE Governor Bailey and MPC member Cunliffe who are due to speak late in the day.

At the time of writing, the Pound was down by 0.05% to $1.3589.

Across the Pond

Housing sector figures for December are due out. We don’t expect the numbers to influence, however.

On Tuesday, the U.S Dollar Spot Index rose by 0.50% to end the day at 95.732.

For the Loonie

Inflation figures for December are due out later today. Expect plenty of interest in the numbers.

The IEA’s monthly report and crude oil inventories will also draw interest, however.

At the time of writing, the Loonie was up by 0.06% to C$1.2507 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

January 19th 2022: Technical Outlook Ahead of UK Inflation Data

Charts: Trading View

(Italics: Previous Analysis Due to Limited Price Change)

EUR/USD:

Weekly timeframe:

Long-standing resistance from $1.1473-1.1583 (active S/R since late 2017) entertained a bearish showing last week, with price currently down by 0.8 percent so far this week.

Downstream, familiar support resides at $1.1237-1.1281. Made up of a 61.8% Fibonacci retracement at $1.1281 and a 1.618% Fibonacci projection from $1.1237, this area, as you can see, delivered a floor heading into the close of 2021. ‘Harmonic’ traders will acknowledge $1.1237 represents what’s known as an ‘alternate’ AB=CD formation (extended D leg).

Strengthening the aforementioned resistance area, the pair took out 2nd November low (2020) at $1.1603 in late September (2021), suggesting a downtrend on the weekly timeframe. This is reinforced by the monthly timeframe’s primary downtrend since mid-2008.

Daily timeframe:

Following Friday’s whipsaw above a 7-month trendline resistance, extended from the high $1.2254, established by way of a bearish engulfing candle (a reversal pattern in which focus is directed to the real candle body rather than upper and lower shadows), Europe’s single currency plunged south against a broadly stronger dollar yesterday.

Should bearish follow-through emerge, Quasimodo support offers an obvious target at $1.1213.

Momentum studies, derived through the relative strength index (RSI), supports additional downside on this timeframe, marginally crossing under the 50.00 centreline (average losses outweighing average gains: negative momentum).

Trend on this scale has been lower since June 2021.

H4 timeframe:

Support from $1.1382 and the decision point at $1.1354-1.1379 experienced a one-sided breach Tuesday, leaving behind clear resistance areas to be mindful of. This was a noted move to be aware of, given higher timeframe technical structure (see above).

Knocking on the door of Quasimodo support at $1.1272 is now on the table if sellers strengthen their grip. Yet, before rotating lower, retesting the aforementioned resistances could be seen.

H1 timeframe:

A dominant USD bid, supported by rising US Treasury yields and major US equity indexes plunging, guided EUR/USD through a number of pivotal demand areas on Tuesday. Upbeat economic data out of Europe as well as soft US economic numbers had limited effect.

Consequently, short-term action is on the doorstep of $1.13, while any upside attempts must confront demand-turned supply at $1.1344-1.1332 and $1.1363-1.1375.

Out of the relative strength index (RSI), the value is shaking hands with indicator support within oversold territory at 18.00. This is a location some chartists will anticipate a slowing of downside momentum. Exiting oversold, therefore, may be watched.

Observed Technical Levels:

H1 price movement approaching $1.13 unlocks the door to a potential whipsaw into the upper wall of weekly support at $1.1281. A subsequent H1 price close back above $1.13, therefore, may be viewed as a bullish signal. Prior to this, watch for possible retests of demand-turned supply at $1.1344-1.1332 and $1.1363-1.1375 on the H1.

AUD/USD:

Weekly timeframe:

Prime support at $0.6968-0.7242 continues to play a crucial role on the weekly timeframe. Bulls, as you can see, embraced a modestly bullish stance into the close of 2021. 2022, on the other hand, has been undecided so far. Should buyers continue pressing higher, resistance is formed at $0.7501. Manoeuvring beneath $0.6968-0.7242 reveals support at $0.6673 and a 50.0% retracement at $0.6756.

Since mid-Feb 2021, a modest downside bias has been seen. This followed higher prices since pandemic lows of $0.5506 (March 2020). However, it is important to note that from the monthly timeframe the unit has been entrenched within a large-scale downtrend from mid-2011.

Daily timeframe:

Following the near-test of resistance between $0.7418 (the 200-day simple moving average) and $0.7315 (a 100% Fibonacci projection at $0.7315), continuation selling unfolded. Aside from the $0.7130 low (7th January) and the $0.7082 (20th December [2021]) low, obvious support at $0.7021 calls for attention.

The relative strength index (RSI) continues to circle the 50.00 centreline. $0.7418-0.7315 sellers, therefore, will likely be watching for the indicator to secure position beneath the 50.00 neighbourhood, movement informing market participants that average losses exceed average gains.

H4 timeframe:

$0.7169-0.7187 demand put in an appearance on Tuesday and, within the lower range of the aforementioned area, has begun to show some ‘bullish life’. Unlikely sufficient to fuel buyer confidence, traders are urged to pencil in the possibility of dipping lower and connecting with neighbouring Quasimodo support at $0.7146. In the event buyers gain footing, resistance can be seen at $0.7250.

H1 timeframe:

Early hours Tuesday witnessed a decisive decline through the lower boundary of a pennant formation ($0.7223 and $0.7196) and $0.72. Shortly following a retest of $0.72, recent hours clocked a low just ahead of Quasimodo support at $0.7168. Territory beneath the latter shines the technical spotlight on demand at $0.7126-0.7141, arranged a handful of pips under H4 Quasimodo support mentioned above at $0.7168.

As for the relative strength index (RSI), we remain exploring waters south of the 50.00 centreline after failing to find acceptance above the latter early trade.

Observed Technical Levels:

Subdued buying within prime support at $0.6968-0.7242 on the weekly timeframe and scope to navigate lower on the daily timeframe places a question mark on H4 demand at $0.7169-0.7187. As a result, $0.72 drawing resistance should not surprise.

USD/JPY:

Weekly timeframe:

After touching gloves with a 1.272% Fibonacci projection from ¥116.09 in the shape of a shooting star and refreshing multi-year pinnacles, USD/JPY tumbled 1.2 percent last week. While modest recovery efforts developed in recent trading, the path of least resistance remains to the downside towards support at ¥112.16.

In terms of trend, the unit has been advancing since the beginning of 2021, welcoming a descending resistance breach, drawn from the high ¥118.61. In consideration of the trend, a dip-buying theme from ¥112.16 is a reasonable assumption.

Daily timeframe:

Tuesday settled in the shape of a shooting star candlestick formation. This follows Friday’s hammer pattern and Monday’s subsequent bullish follow-through.

The technical framework to be mindful of on this chart has Quasimodo resistance to target at ¥116.33, whereas downstream shines light on demand at ¥112.66-112.07, tailed closely by a decision point from ¥111.18-111.79 and the 200-day simple moving average at ¥111.37.

In terms of the relative strength index (RSI), support between 40.00 and 50.00 (a ‘temporary’ oversold range since 10th May) remains active.

Much like the weekly timeframe, trend on the daily scale points to the upside.

H4 timeframe:

Quasimodo support-turned resistance at ¥114.71 elbowed into the frame Tuesday and, albeit not to the pip, held back buyers. The whipsaw above resistance topped within a stone’s throw of trendline resistance, taken from the high ¥116.35, and a decision point from ¥115.49-115.24.

Pursuing lower prices highlights a familiar decision point at ¥113.54-113.78, set a few pips above Quasimodo support at ¥113.22.

H1 timeframe:

Ahead of the close, USD/JPY leaves behind a subdued tone, in spite of rising US Treasury yields and healthy USD demand, together with a dovish Bank of Japan (BoJ).

For those who read Tuesday’s technical briefing you may recall the following (italics):

Between H4 Quasimodo support-turned resistance at ¥114.71 and H1 Quasimodo support-turned resistance at ¥114.83, sellers could be drawn to this area (some traders are likely to include the ¥115 figure in this resistance zone).

As evident from the H1 chart, price did indeed welcome a ¥115 test on Tuesday and resigned to lows of ¥114.50ish. Support calls at ¥114.32, with a break shifting attention to the ¥114 figure. Note, ¥115 was accompanied by an overbought signal; the indicator has since crossed swords with the 50.00 centreline, threatening possible movement in the direction of oversold levels.

Observed Technical Levels:

Short term, H4 Quasimodo support-turned resistance at ¥114.71 holding, together with the ¥115 figure also serving well as resistance, could influence a bearish scene towards H1 support at ¥114.32 and, with a little ‘oomph’, ¥114.

GBP/USD:

Weekly timeframe:

The current 4-week bid—initiated ahead of the double-top pattern’s ($1.4241) profit objective around $1.3093 (red boxes)—is echoing a weaker tone this week, down 0.6 percent.

‘Consumed supply’ (blue area) is nearby between $1.4001 and $1.3830. Considering this, candle action may still be guided as far north as resistance from $1.4371-1.4156 in the coming weeks.

In regards to trend, the weekly timeframe’s position shows higher prices since early 2020. However, it’s important to recognise that while the trend on the weekly timeframe demonstrates an upside bias, the monthly timeframe’s long-term trend has been lower since late 2007.

Daily timeframe:

Three back-to-back daily bearish candles materialised after touching the lower side of the 200-day simple moving average at $1.3732.

Observed support at $1.3602 has consequently come under attack. Ceding ground here unbolts the technical space for neighbouring trendline resistance-turned support to make a show, taken from the high $1.4250.

The relative strength index (RSI) recorded overbought conditions in line with price testing the noted SMA and has since exited the area. This—coupled with the value fast approaching the 50.00 centreline—is considered by many technicians as a sign upside momentum is beginning to slow. Crossing under the 50.00 zone helps confirm a bearish stance.

H4 timeframe:

The decision point at $1.3622-1.3646 put up little fight on Tuesday, leaving nearby resistance at $1.3668 unopposed. Below the decision point, aside from a number of ‘local’ lows, demand is at $1.3428-1.3444.

Ultimately, this timeframe exhibiting scope to travel lower works alongside the daily timeframe recently cracking support at $1.3602.

H1 timeframe:

The latest round of downside movement on GBP/USD, amidst demand for the US dollar on the back of rising US Treasury yields, watched candle action pull through $1.36 to test nearby Quasimodo support at $1.3580. Under the latter, assuming $1.36 maintains resistance, chart studies show price could zero in on support from $1.3533 and maybe $1.35.

The relative strength index (RSI) rose from oversold space and is nearing 40.00. Note that the indicator has chalked up a ‘temporary’ overbought zone between 50.00 and 40.00, given the markets immediate downside bias since last Thursday.

Observed Technical Levels: 

The daily timeframe threatening to dethrone support at $1.3602, in association with H4 price pushing under $1.3622-1.3646 and the H1 kissing the lower side of $1.36, opens up a bearish theme. Conservative traders are likely to wait for H1 price to close below Quasimodo support at $1.3580 before committing, targeting H1 support at $1.3533 and $1.35 (aligns closely with the daily timeframe’s trendline resistance-turned support, taken from the high $1.4250).

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Euro Pulls Back Towards Previous Resistance Barrier

The Euro has shown itself to be a bit soft during the trading session on Tuesday to reach down towards the 50 day EMA and perhaps more importantly, the area we broke out of from the previous consolidation area, which of course had been building pressure to the upside. At this point, it will be interesting to see whether or not we can continue to find interest in this area, because if we do, we can then see this market go a bit higher, this of course would be a simple “breakout and retest of previous consolidation.”

EUR/USD Video 19.01.22

It will be interesting to see how this plays out, but I would not jump in right away. I believe that by the end of the day we should have a clear signal, and if we can stay above the 1.13 level, we should see a certain amount of buying pressure, but obviously with the markets being so out of control when it comes to fear recently, you cannot bank on anything right away.

With this, a little bit of caution and a lot of patience probably goes a long way. The question now is whether or not we focus on interest rates rising in the United States, or the fact that the Federal Reserve seems to be hell-bent on tightening into a slowdown, which almost certainly will cause a recession. On the other hand, the ECB seems less likely to tighten, which could allow for growth in the EU if they can knock it off with locking everything down.

For a look at all of today’s economic events, check out our economic calendar.

Euro May Have Enough Downside Momentum to Reach 1.1335

The Euro is trading lower on Tuesday, pressured by a stronger U.S. Dollar and rising U.S. Treasury yields as investors were positioning themselves for higher interest rates in the United States. The rise in U.S. Treasury yields pushed the Euro to a four-day low.

At 12:32 GMT, the EUR/USD is trading 1.1389, down 0.0017 or -0.15%. On Friday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $106.08, down $0.34 or -0.32%.

The U.S. Federal Reserve meets next week. It is expected to raise rates in March, for the first time since the start of the coronavirus pandemic, and investors are pricing in four rate hikes in 2022.

As investors braced for the possibility of the Fed being more hawkish than expected, U.S. Treasury yields jumped on Tuesday, with two-year yields (which track short-term rate expectations) crossing 1% for the first time since February, 2020.

Daily EUR/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, but momentum has been trending lower since the formation of the closing price reversal top on January 14.

Taking out 1.1483 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a trade through 1.1272.

The minor range is 1.1272 to 1.1483. Its 50% level at 1.1377 is the next downside target. It’s also potential support and a trigger point for an acceleration to the downside.

The short-term range is 1.1186 to 1.1483. Its retracement zone at 1.1335 to 1.1300 is the most likely downside target. Since the main trend is up, buyers are likely to show up on the first test of this area.

The main range is 1.1692 to 1.1186. Its retracement zone at 1.1439 to 1.1499 is resistance. This zone stopped the rally on Friday at 1.1483.

Daily Swing Chart Technical Forecast

The direction of the EUR/USD on Monday is likely to be determined by trader reaction to the pivot at 1.1377.

Bullish Scenario

A sustained move over 1.1377 will indicate the presence of buyers. If this move creates enough upside momentum then look for a retest of the main retracement zone at 1.1439 to 1.1499 over the near-term.

Bearish Scenario

A sustained move under 1.1377 will indicate the early selling pressure is getting stronger. This could extend the selling into the retracement zone at 1.1335 to 1.1300. Since the main trend is up, buyers could come in on a test of this area so look for a technical bounce. This is the last major support before the multi-year low at 1.1186.

For a look at all of today’s economic events, check out our economic calendar.

EUR Brushes Aside Spike in German and Eurozone ZEW Economic Sentiment Figures

It was a busier day on the Eurozone economic calendar. ZEW Economic Sentiment figures for Germany and the Eurozone were in focus early in the European session.

In January, Germany’s ZEW Economic Sentiment Index jumped from 29.9 to 51.7. Economists had forecast an increase to 32.0. The Eurozone Economic Sentiment Index also impressed, rising from 26.8 to 49.4. Economists had forecast a rise to 29.2.

For Germany, the ZEW Current Conditions Index disappointed, however, falling from -7.4 to -10.2. Economists had forecast a more modest decline to -8.5.

In spite of the improved sentiment, the EUR failed to revisit highs from earlier in the day.

Market Impact

Ahead of today’s stats, the EUR had risen to a pre-stat and current day high $1.14214 before sliding to a pre-stat and current day low $1.13851.

In response to today’s stats, the EUR rose to a post-stat high $1.13995 before falling to a post-stat low $1.13921.

At the time of writing, the EUR was down by 0.09% to $1.13957. A break back through to $1.14 levels would support a run at this morning’s high $1.14214. A spike in U.S Treasury yields, however, has driven demand for the safe havens, weighing on the European majors.

The DAX was down by 1.36%, at the time of writing, with the CAC40 down by 1.24%.

180122 EURUSD Hourly Chart

Next Up

NY Empire State Manufacturing numbers from the U.S. We don’t expect the figures to have a material impact on market risk sentiment on the day, however.

US Dollar Index Short-Covering Rally Targets 95.755 – 96.020

The U.S. Dollar is edging higher against a basket of major currencies early Tuesday as U.S. Treasury yields hit a new two-year high on their return from a long weekend break. The strength in the greenback was fueled as the short-end of the yield curve hit new pandemic highs, which is supportive for the U.S. currency.

At 08:27 GMT, March U.S. Dollar Index futures are trading 95.295, up 0.134 or +0.14%. On Friday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $25.49, up $0.06 or +0.24%.

Two-year yields rose above 1% for the first time since February 2020 at the open in Asia, as trading returned after a U.S. holiday, and five-year yields rose 3.6 bps to 1.5960%, the highest since January 2020.

Yields have been rising this year, with traders expecting the Federal Reserve to begin hiking interest rates as soon as March, but the dollar index, which measures the greenback against six peers has lost 0.52% year to date.

This suggests investors have fully-priced in the Fed’s expected rate hikes. Given this outlook and the current downtrend, the index is likely going through a correction, which means we can expect to see new short-sellers once it reaches resistance.

Daily March U.S. Dollar Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum has been trending higher since the formation of the closing price reversal bottom on Friday.

A trade through 94.610 will negate the closing price reversal bottom and signal a resumption of the downtrend. A move through 96.475 will change the main trend to up.

The main range is 93.200 to 96.895. Its retracement zone at 95.050 to 94.610 is support. It stopped the selling at 94.610 on January 14.

The next two minor resistance levels is a pair of 50% levels at 95.360 and 95.545.

The short-term range is 96.895 to 94.610. Its retracement zone at 95.755 to 96.020 is the primary upside target. Since the main trend is down, we’re looking for sellers to come in on a test of this area.

Daily Swing Chart Technical Forecast

The direction of the March U.S. Dollar Index on Tuesday is likely to be determined by trader reaction to 95.360.

Bullish Scenario

A sustained move over 95.360 will indicate the presence of buyers. This could fuel a labored rally into a series of retracement levels at 95.545, 95.755 and 96.020.

Since the main trend is down, look for sellers to return on a test of 95.755 to 96.020. They will be trying to produce a potentially bearish secondary lower top.

Bearish Scenario

A sustained move under 95.355 will signal the presence of sellers. This could trigger a retest of 95.050 to 94.610.

If 94.610 fails to hold as support then look for an acceleration to the downside with 93.810 the first downside target, followed by 93.200.

For a look at all of today’s economic events, check out our economic calendar.

2022 – More Tapering Has Been Undertaken, The US Inflation Rate Is No Longer Considered Transitory

Global Environment:

Omicron, however, has the potential to magnify the downward risks facing the economy. The Personal Consumption Expenditures (PCE) Prices Index and the core PCE Prices Index both registered new highs in October. During the FOMC meeting in December, it was decided to double the pace of monthly bond purchases to USD 30 billion in advance of the end of the asset purchase program in March 2022, which leaves room for a modest interest rate hike 2022.

When discussing inflation, the Fed retired the term transitory. As a result of the dot plot revisions, there will be three increases in 2022 and 2023 and two increases in 2024. At the beginning of 2024, interest rates are still projected to be lower than the long-term equilibrium rate, suggesting that the pace of rate increases will be moderate. In the absence of continued inflationary pressure, the Fed will likely raise interest rates for the first time around mid-2022 and then implement two 0.25 percent rate hikes throughout this year.

As a result of the Omicron variant, the Eurozone has experienced a significant hindrance to its recovery, and therefore restrictive measures have been implemented across many countries to prevent epidemics. As a result of these actions, the economy is expected to exhibit a short-term slowdown.

However, after the pandemic has been brought under control, it is expected to resume its growth momentum. The annualized growth of the Eurozone’s GDP in Q2 and Q3 of 2021 has reached a record high for the past two decades. The reason for this is a low base in 2020 and the Pandemic Emergency Purchase Program (PEPP) enacted by the European Central Bank.

The central bank estimated that the annualized inflation rate would reach a record high in November 2021. Since the European Central Bank has reiterated its stance of maintaining monetary easing, the pace of purchases of assets is likely to slow, but it is not expected that interest rates will rise anytime soon. There remains sufficient liquidity, and the economy is supported to some extent. The Eurozone’s growth will slow down, however, as the low-base effects diminish as inflation undermines the economy.

Growth of the British economy in October slowed to 0.1 percent, the lowest in three months, suggesting a slowdown in economic expansion. In the U.K., economic performance is expected to be dominated by the Omicron variant over the next two to three quarters. Economic activities, in particular those in the service sector, will suffer adverse effects as a result of the activation of Plan B for epidemic prevention and control.

Based on preliminary analysis, the U.K. economic situation is likely to worsen. There is a certain amount of inflationary pressure resulting from the Omicron variant. The Bank of England expects that the price index will peak at 6% this spring.

Chinese economic data released in November 2021 showed both positive and negative signs. It is noteworthy that the value added to industrial activities grew by 3.8% on a year-over-year basis and by 0.37% on a month-over-month basis; however, the growth rate remains below the historical average. The consumer data was weakening due to the pandemic recurrence.

As evidenced by the growth rate of fixed-asset investment in November 2021, the decline in real estate investment has narrowed considerably, whereas the decline in infrastructure investment has widened. At the same time, trade data remained solid. During November, the CPI rose by 2.3% year-over-year and 0.4% month-over-month, primarily driven by increases in food and energy prices. In the next stage, it will be necessary to pay attention to upward price movements.

PPI has slowed to some degree as a result of the implementation of policies for ensuring supply and stabilizing prices, and it is expected to continue to decline year-over-year. It was reported in November that China’s outstanding total social financing (TSF) increased by 10.11% year-over-year to RMB 2.61 trillion. TSF’s growth can be attributed to the policies of ensuring supply, stabilizing prices, and easing real estate financing procedures showing signs of accelerated recovery. Considering the implications of the global health crisis pandemic, it is important to consider whether or not the current unstable level of economic equilibrium is already a new equilibrium.

According to the Central Economic Work Conference report, China’s economic growth is being challenged by four factors: shrinking demand, supply shock, weakening expectations, and overheating. Policymakers emphasized once again during the conference the need to center the policy discussion around economic development, and it is expected that the subsequent policies will provide more support to stabilizing growth. Our projections indicate that the macroeconomic situation will stabilize before a rebound occurs.

Commodities

On precious metals, U.S. President Joe Biden announced that he would nominate Jerome Powell as chairman of the Federal Reserve in November 2021. Powell has since disassociated the term transitory from inflation and has emphasized hawkish signals that exceeded expectations. During the month, expectations of monetary tightening returned to the foreground while gold and silver prices declined from high levels of the range of oscillations. We believe the central conflict in the next stage will remain between market expectations for an increase in interest rates in 2022 and the Federal Reserve’s laggard position in the policy of monetary tightening.

It is expected that U.S. interest rates will gradually move towards market expectations within the next two quarters. Before the first rate hike, the precious metal market was under pressure, and there may only be a rebound after experiencing a bearish trend. As regards the crude oil market, it is anticipated to reach highs in January 2022. As a result of the significant oil-consuming countries continuing to utilize their strategic reserves, the crude supply is likely to increase in the near term, therefore placing pressure on oil prices.

Meanwhile, the market widely expects the negative impact of the Omicron variant to be limited, and the steady recovery of demand is expected to support oil prices. However, following a significant decline in crude oil prices in December 2021, the current price level is moving towards equilibrium and is expected to maintain an oscillating pattern of fluctuation. Receive latest price updates

Crude Oil: A bullish and a bearish trend coexist in crude oil prices, suggesting a high price trend is likely to persist

As we look back to the crude oil market in December 2021, prices showed an upward trend amid oscillations following sharp drops in November. Oil prices significantly declined due to the release of strategic reserves and the market’s concerns about the Omicron variant. These factors are still being factored into the market through the month of December. In December 2021, OPEC + forecasted that global average daily oil demand would reach 99.13 million barrels in Q1 2022. This prediction had been revised upwards by 1.11 million barrels from November.

This report shows that Omicron will only have a mild impact in the short term, which supports oil prices. January 2022 is predicted to be characterized by high crude oil prices amid oscillations. As a result of the heavy consumption of crude oil, major oil-consuming nations are increasingly tapping their reserves, which in turn will increase supply and put pressure on oil prices. On the other hand, the impact imposed by the A stable recovery of oil demand and a limited outbreak of the Micron virus should support oil prices.

However, with the significant declines of crude oil prices in December 2021, the current oil prices tend to reach a level of equilibrium and are expected to maintain a trend of consolidation at highs amid oscillations.

US Dollar: Although technical resistance exists in the short term, the USD remains unchanged relative to its mid-line pattern

Since the middle of 2021, the USD has gained strength. On the horizon for 2022, this year’s research will be focused on whether the trend at the end of 2021 will be reversed or repositioned due to the increase in market liquidity at the outset of the year. The market trend is often subject to transition or modification from time to time after the market expectations have been fully accounted for. In the present situation, the U.S. Dollar Index is technically showing a certain resistance level close to 97. It should be noted that the FOMC determined to accelerate tapering at its December meeting and will not raise interest rates until tapering has been completed.

The FOMC dot plot revisions also point towards three rate increases in 2022, whereas the date initially planned for the completion of the tapering in mid-2022 is likely to become the start of interest rate hikes. Early and accelerated rate hikes are expected to remain supportive of the two-year treasury yield, even though accelerating the pace of interest rate hikes will contribute to controlling inflation and inhibiting long-term U.S. treasury yield increases.

Because the USD has always been closely linked to the yield on two-year treasuries, it is likely to maintain its advantage over other currencies. The market is also expecting that the strengthening of the dollar will last until the formal rate hikes and when the market has fully priced in the expectations.

EUR/USD: EUR suffers from a delay in tightening of ECB policy

Throughout the year, EUR’s performance has been below par. As the ECB maintained a dovish policy stance, this, coupled with the Fed’s hawkish policy shift, caused EUR to gradually decline throughout the year, reaching as low as 1.1186. In the year 2022, like USD, it remains unclear whether EUR will experience technical adjustment to the exchange rate due to the transition or changes in liquidity and expectations.

Furthermore, as the Fed has announced plans to intensify its tapering scheme, the ECB, at its final policy meeting at the end of 2021, has also announced that it will increase the volume of its original Asset Purchase Program following the end of the Pandemic Emergency Purchase Program (PEPP), to inject liquidity to the market to an extent. Market concerns have been eased by this news release, which has proven to be positive for the rebound of the euro. The market expects central banks to tighten monetary policy and increase interest rates shortly, and investors should pay attention to the rising global inflation rate.

Moreover, the European Central Bank expects inflation to reach 3.2% in 2022 before declining to 1.8% in 2023 and 2024. It is worth noting, however, that although data inform ECB’s assessment, it also suggests that it is unlikely that rates will be raised in Europe in 2022. Euro’s position as a funding currency remains unchanged, and the probability of the EUR declining after the rebound is anticipated to be higher.

GBP/USD: The GBP is supported by the BoE’s unexpected interest rate hike, but its economic impact upon the Omicron variant needs attention.

The Monetary Policy Committee (MPC) of the Bank of England raised interest rates by 15 basis points in December 2021, exceeding market expectations. According to the BoE’s latest monetary policy statement, it appears that the rate hike is centered on the concern of inflation surging at a rapid pace.

Approximately 5% is expected to be the inflation rate throughout the winter and will comfortably exceed 5% in April 2022. Enhanced inflation is mainly due to the lag in wholesale gas prices in the United Kingdom on utility bills. Regarding the U.K.’s economic outlook, the BoE’s policy statement has been neutral, focusing on the recent employment recovery towards a rosy outlook while explaining the impact of the Omicron variant on economic activity in the near term. Future challenges are on the horizon for the British economy.

The uneven nature of recovery is displayed because consumption, investment, and exports remain well below pre-pandemic levels. The GBP is expected to benefit from a faster tightening of monetary policy in the short term than the market anticipated. In the medium term, investors will pay attention to the impact of the Omicron variant on the economy.

AUD/USD: following stabilization, the AUD tends to rebound

The current exchange rate reflects the stabilization of the AUD before a rebound. Economic data showed that Australia was performing well despite imposing regional lockdown measures in October, which eased market concerns about the country’s fundamentals. The statement made by the RBA Governor on “no interest rate hike in 2022” has, however, been interpreted as reflecting a dovish monetary policy stance to a certain extent, thereby leaving the AUD without constant support.

From a technical perspective, AUD/USD has shifted from unilateral strength at the beginning of 2021 to relative equilibrium. A rebound has been experienced at the support zone near the level of 0.70 since the FOMC meeting, while the growth momentum is still being accumulated in the short term. We believe that AUD tends to rebound following stabilization if the RBA maintains a neutral monetary policy. Stay alert and watch the news closely

This article is prepared by Lucia Han from Mitrade and is for reference only. We do not represent that the material provided here is accurate, current or complete. The article content neither takes into account your personal investment objects nor your financial situation, and therefore it should not be relied upon as such. You should seek for your own advice.

EUR/USD Tests Support At 1.1400

Euro Is Losing Ground Against U.S. Dollar

EUR/USD is currently trying to settle below 1.1400 while U.S. dollar is moving higher against a broad basket of currencies.

The U.S. Dollar Index is trying to settle above the resistance level at 95.40. In case the U.S. Dollar Index manages to get above this level, it will move towards the next resistance at the 50 EMA at 95.55 which will be bearish for EUR/USD.

Today, foreign exchange market traders will focus on Euro Area ZEW Economic Sentiment Index for January. Analysts expect that Euro Area Economic Sentiment improved from 26.8 in December to 29.5 in January despite the spread of Omicron.

Traders will also stay focused on the trajectory of U.S. Treasury yields. Yields continue to move higher as traders bet that Fed will be forced to raise rates aggressively in order to put pressure on inflation.

The yield of 2-year Treasuries has settled above the 1.00% mark while the yield of 30-year Treasuries has moved above the 2.15% level. In case Treasury yields continue to move higher, the American currency may get more support.

Technical Analysis

eur usd january 18 2022

EUR/USD is testing the support level at 1.1400. In case this test is successful, EUR/USD will move towards the next support level which is located at the 50 EMA at 1.1370.

A move below the 50 EMA at 1.1370 will open the way to the test of the support at 1.1350. If EUR/USD declines below this level, it will head towards the next support at 1.1330.

On the upside, the nearest resistance level for EUR/USD is located at 1.1420. This resistance level has been tested several times in recent trading sessions and proved its strength.

In case EUR/USD manages to settle back above the resistance at 1.1420, it will head towards the next resistance at 1.1460. A successful test of the resistance at 1.1460 will open the way to the test of the next resistance level at 1.1490.

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD Reaction to 1.1377 Pivot Sets the Early Tone

The Euro is edging lower against the U.S. Dollar early Tuesday after declining the previous session as investors continued to demand greenbacks despite chatter that the Federal Reserve tightening plans were largely priced in. On Friday, the single-currency hit a two-month high.

At 05:32 GMT, the EUR/USD is trading 1.1397, down 0.0009 or -0.07%. On Friday, the Invesco CurrencyShares Euro Trust settled at $106.08, down $0.34 or -0.32%.

With no major economic data for the Euro Zone on the calendar this week, investors will focus on speeches from President Christine Lagarde, other European Central Bank (ECB) members and the minutes of the ECB’s December policy meeting out on Thursday.

ECB President Christine Lagarde said on Friday, the bank is ready to take any measures necessary to get inflation down to its 2% target. Inflation rose to 5% last month, the highest on record for the 19-counry currency bloc.

Daily EUR/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum has been trending lower since the formation of the closing price reversal top on Friday.

A trade through 1.1483 will negate the closing price reversal top and signal a resumption of the uptrend. A move through 1.1272 will change the main trend to down.

The minor range is 1.1272 to 1.1483. Its 50% level at 1.1377 is the next downside target and potential support.

The short-term range is 1.1186 to 1.1483. Its retracement zone at 1.1335 to 1.1300 is another potential target and the best value area.

The main range is 1.1692 to 1.1186. Its retracement zone at 1.1439 to 1.1499 is resistance. This zone stopped the rally on Friday at 1.1483.

Daily Swing Chart Technical Forecast

The direction of the EUR/USD on Tuesday is likely to be determined by trader reaction to the pivot at 1.1377.

Bullish Scenario

A sustained move over 1.1377 will indicate the presence of buyers. If this move creates enough upside momentum then look for a retest of the main retracement zone at 1.1439 to 1.1499.

Bearish Scenario

A sustained move under 1.1377 will signal the presence of sellers. This could trigger a break into the short-term retracement zone at 1.1335 to 1.1300. Since the main trend is up, buyers could come in on a test of this area. This is the last major support before the multi-year low at 1.1186.

For a look at all of today’s economic events, check out our economic calendar.