The single currency regains the upside and pushes EUR/USD to fresh 2-week tops in the 1.1365/70 band on turnaround Tuesday.
- EUR/USD gains traction and moves closer to the 1.1370 level.
- The EMU Flash CPI increased by 4.9% year over year, while the Core CPI increased by 2.6%
- Unemployment in Germany decreased by 34K, bringing the unemployment rate to 5.3%
EUR/USD fundamental forecast
The EUR/USD swiftly shakes from Monday’s reversal and starts its ascent north of 1.1300, which it reached in the first half of the week.
Omicron
After Moderna’s CEO claimed Covid-19 vaccinations are unlikely to be as successful against the Omicron form as they have been with previous varieties, the euro jumped on Tuesday and is on course for its best three-day winning run this year.
Risk appetite was battered across all markets for the second day in less than a week as his remarks reaffirmed predictions that the global economy will return to normality in the coming months on a difficult and longer route.
Greenback jitters
On Tuesday, the spike in the single currency’s value was particularly noticeable, as traders hurried to close massive short bets on the US Federal Reserve, raising interest rates faster than its global counterparts next year.
The risk complex continues to be undermined by falling US rates and growing risk-off sentiment, keeping the greenback under pressure for the time being.
ECB should maintain lose policy
Outgoing European Central Bank (ECB) Governing Council member and Bundesbank President Jens Weidmann stated that the ECB should be mindful of any pressure to keep its ultra-loose monetary policy in place for longer than the price outlook permits.
Key data releases from EUR
On the calendar front, the important decisions of the week are the German labor report, Flash CPI, German Retail Sales, and Lagarde’s speech.
Key data releases from the US
Across the pond, Chief Powell’s speech will take center stage, followed by the Conference Board’s Consumer Confidence Index.
What’s next?
In the face of continued dollar weakness, the EUR/USD surges over the important 1.1300 barriers to new highs. The greenback’s corrective fall pushed up the rise higher in spot. However, this is only temporary.
Fresh coronavirus fears spurred by discovering the novel variant Omicron last week are likely to keep demand for the safe haven on the rise, at least for the time being.
Meanwhile, based on the ECB-Fed policy divergence, rising Covid-19 cases in Europe, and some loss of momentum in the euro area’s economic recovery, as seen by some deterioration in key fundamentals, the outlook for the European currency remains gloomy.
EUR/USD technical analysis: key levels in action
EUR/USD gained 0.60% during the day and is now trading at 1.1367. The pair is below the 100-day MA on the daily chart, but the MACD is pointing upwards. This suggests a short-term bullish momentum.
The pair is now seeking to maintain its position above 1.1360. This point is a pivot point for the pair. If the pair goes below this level, it can go towards the next support at 1.1258; it’s yesterday’s low.
On the upside, the pair’s resistance is at 1.1389. If the pair can break above this level, the next resistance lies at 1.1464, the level it reached on November 15.
