Market news

28 December 2021

EUR/USD: Bulls and bears jostle above 1.1300 amid USD rebound

  • EUR/USD stays pressured around intraday low, keeps short-term trading range intact.
  • Jump in US 2-year Treasury yields to March 2020 levels underpin USD recovery amid sluggish session.
  • Firmer US retail sales, US CDC announcement on quarantine details join Omicron news to favor greenback bulls.
  • Lack of data/events signal further sideways grind during year-end holiday season, second-tier US data, risk catalysts eyed.

EUR/USD hovers around intraday low, consolidating the previous day’s gains above 1.1300 during early Tuesday morning in Europe. That said, the major currency pair seesaws around 1.1325 by the press time while keeping sideways grind established since last Wednesday.

Firmer prints of the US 2-year Treasury yields could be linked to the pair’s latest weakness as the US Dollar Index (DXY) tracked the short-term bond coupons to rebound. That said, the stated Treasury yields jumped to the highest since March 2020 before recently easing to 0.75%.

On the other hand, the 10-year counterpart stays mostly inactive around 1.48% after the 1.7 basis points (bps) of a decline marked the previous day. Moving on, the DXY bounces off the monthly support line to defend the 96.00 threshold.

It’s worth noting that an 8.5% jump in US retail sales during the holiday season, per Mastercard, joins comments from US Vice President Kamala Harris suggesting the use of her tie-breaking vote to pass President Joe Biden’s Build Back Better (BBB) stimulus plan favor USD bulls. On the same line could be the US Centers for Disease Control and Prevention’s (CDC) reduction in the isolation and quarantine period for the general population from the previous 10 to five.

Receding fears of the Russia-Ukraine tension and headlines from the People’s Bank of China (PBOC) and the Chinese Finance Ministry, suggesting further easy money to help sustain the growth of the world’s second-largest economy, also favored the risk appetite.

Above all, a rethink over the previous optimism surrounding the South African covid variant, namely Omicron, as well as an absence of major updates, seem to weigh on the EUR/USD prices during a sluggish session. However, the ECB v/s Fed battle can keep the bears hopeful.

Looking forward, the US S&P/Case-Shiller Home Price Indices and House Price Index for October will precede the Richmond Fed Manufacturing Index for December to entertain intraday traders. However, major attention will be given to the Omicron headlines and risk catalysts mentioned above.

Technical analysis

EUR/USD recently conquered a symmetrical triangle formation established since December 16. However, the quote’s successful trading above 200-SMA level of 1.1300 joins firmer RSI, not overbought, to keep the buyers hopeful.

 

Market Focus

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

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