Forex news for EUR/USD on Thursday 23 December 2021
After a surge in US inflation figures, the EUR/USD is testing 1.1300.
The EUR/USD looks set to snap a three-day winning streak on Thursday as the dollar’s downward momentum fades. The pair tested Wednesday’s weekly highs above 1.1340 during Asia Pacific trade, but has since retreated down towards the 1.1300 level, where it presently trades 0.2 % lower on the day. The pair is still up approximately 0.6 % on the week, but EUR/USD has stumbled before targeting December highs in the 1.1360 range. Analysts and FX strategists had predicted that in the run-up to the Christmas and New Year’s holidays, amid dwindling liquidity, the pair, like the rest of the FX majors, would struggle to break out of previous ranges.
For the time being, this appears to be the case, since trade volumes for EUR/USD have been significantly lower than on a typical day on Thursday. The release of a slew of US data later in the afternoon could be one cause of potential volatility. At 1330GMT, the November Durable Goods Orders, November Core PCE (the Fed’s preferred inflation gauge), November Personal Income and Spending, and the most recent weekly initial jobless claims report will all be released. The final version of the University of Michigan’s December Consumer Sentiment survey, along with November New Home Sales figures, is then issued at 1500GMT.
According to MUFG analysts, “although the recent recovery in risk sentiment on the back of lessened Omicron worries is now weighing on the US dollar, we believe the correction down to be temporary.” “Hawkish statements from Fed officials, particularly Fed Governor Waller and San Francisco Fed President Daly, have hinted that they are considering hiking rates as soon as the March FOMC meeting,” the bank added.
Indeed, hopes that the dollar will regain some stability and surge higher in the new year, despite an increasingly hawkish Fed and underlying strength in the US economy, appear to be a consensus among FX strategists right now. The fact that the DXY, despite being down on the week, remains comfortably within its December levels and on track for significant on-year gains of about 7.0 % shows that, from a technical standpoint, long-term bullish momentum remains strong.
In the early American session, the EUR/USD continues modestly bearish and tests 1.1300 despite further dollar strength. The US Bureau of Economic Analysis said on Thursday that Core PCE inflation increased to 4.7 % in November from 4.2 % in October.
The EUR/USD pair is presently consolidating around a Fibonacci level of 1.1305, which represents a 23.6 % retracement of the November drop. Following the release of the first batch of US data, the greenback rose slightly, and the pair is now trading around the stated level. In the short term, the picture is neutral-to-bearish, as technical indicators have turned lower within positive levels and are now approaching their midlines from above. The 20 and 100 SMAs converge around 1.1300, while the 200 SMA is a few pips lower, a few pips above the current level. A breach below 1.1250, a static support region, might give the bearish case more traction.
The EU calendar had nothing relevant to share, but the US calendar is jam-packed with events surrounding the forthcoming Christmas holiday, which means most financial markets will be closed on Friday. The US has released November Durable Goods Orders, which increased 2.5 % , exceeding estimates. Initial Jobless Claims were 205K, as expected, for the week ending December 17, while the November core PCE Price Index increased to 4.7 % , up from 4.2 % earlier and more than the 4.5 % projected.
Dow futures +0.34% at 35870
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Euro Stoxx +0.7% at 4247
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