A small flattening of the EUR/USD pair below 1.1300 indicates that the corrective rebound from the weekly low has faded away.
Treasury yields have remained firmer as the market continues to be optimistic about the new Omicron COVID strain. The German ZEW and the Eurozone’s GDP are also scheduled to be released today.
Overview Of The Technical Aspects
EUR/USD CHART Source: Tradingview.com
Technically, little appears to have altered for the pair, as admission underneath the 23.6% Fibonacci retracement level of the 1.1692-1.1186 decline increases the likelihood of fresh losses.
Significant follow-through trading beneath Friday’s swing low, near the 1.1265 range, will reinforce the bearish bias and make the pair susceptible to a retest of the sub-1.1200 range or November 25 YTD low.
The 1.1170-65 opposition breakpoint, turned support, might send the duo to the 1.1145 support area. The pair may soon reach the 1.1100 round-figure threshold as the downward trend continues.
Conversely, any effort to return above 1.1300 currently faces heavy resistance around the post-NFP high, near 1.1330-35.
A sustained rise above 1.1400 could push the pair back toward the 1.1380-85 resistance zone (38.2 percent Fibo level). A short-covering move might drive the trend towards the 50% Fibo level, around 1.1440.
Overview Of The Basics
The EUR/USD pair gained ground on Tuesday, albeit the move lacked bullish momentum and was not accompanied by significant follow-through purchasing.
Due to the existing risk-on environment, demand for the relatively secure US Dollar declined. This, in turn, was perceived to be a crucial factor contributing to the strengthening of the pair.
A better-than-expected increase in German industrial production (up 2.8% MoM) in October boosted the common currency.
The rising consensus that the Fed will tighten the fiscal system relatively soon to contain persistently high inflation has continued to function as a positive force for the Dollar.
The markets have already factored in the prospect of a launch as early as May 2022, according to Reuters. This, together with a rise in US Treasury bond yields, limited the USD’s downside and halted the major from moving higher.
Conversely, the ECB has resisted market calls for tighter policy and downplayed the necessity of any anti-inflation measures.
The ECB’s and Fed’s differing monetary policy stances significantly slowed traders’ aggressive and optimistic bets on the pair. The fundamentals seem to favor bearish traders and point to the downside as the route of least resistance.
The ZEW Economic Sentiment Report for Germany and the Eurozone will be released shortly, which may impact the common currency and boost the major.
The US has no important economic data due out today, leaving the USD at the mercy of US bond yields. Aside from that, the wider market risk mentality will boost safe-haven USD demand and create market opportunities.