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EUR/USD bounces off lows around 1.1300, back near 1.1350

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FXStreet in Market News 12 197981
January 21, 2022 18:33

content provided with permission by FXStreet

  • EUR/USD meets support in the 1.1300 neighbourhood.
  • The dollar looks offered on the back of lower yields.
  • ECB Lagarde, flash Consumer Confidence next on tap.

The single currency has regained its smile at the end of the week, helping EUR/USD return to the 1.1350 region.

EUR/USD up on dollar weakness

EUR/USD is regaining upside traction and meeting buying interest in the 1.1300 zone after Thursday’s pullback. The recent price action is overall consolidative amidst alternating risk appetite trends in global markets.

Friday’s uptick reflects an offered greenback which has come under pressure due to the decline in US yields along the curve.

On the calendar for the euro, we have Consumer Confidence for the month of January from the the European Commission (EC) along with speeches by ECB Board member Fernandez-Bollo and Chairwoman Lagarde.

Across the pond, the only release will be the Leading Index tracked by the Conference Board.

What to look for around EUR

EUR/USD came under pressure after hitting new YTD highs in the 1.1480 region earlier in the month, finding some contention in the low-1.1300s so far this week. The Fed-ECB policy divergence and the performance of yields are expected to keep driving the price action around the pair for the time being. Recently ECB officials have been quite vocal in acknowledging that high inflation could last longer in the euro area, sparking fresh speculation the central bank could raise rates by the end of 2022. The unabated advance of the coronavirus pandemic remains as the exclusive factor to look at when it comes to economic growth prospects and investors’ morale in the region.

Key events in the euro area this week: ECB Lagarde, EC’s Flash Consumer Confidence (Friday).

Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the euro area. ECB stance/potential reaction to the persistent elevated inflation in the region. ECB tapering speculation/rate path. Italy elects President of the Republic in late January. Presidential elections in France in April.

EUR/USD levels to watch

So far, spot is gaining 0.27% at 1.1341 and faces the next up barrier at 1.1480 (100-day SMA) seconded by 1.1482 (2022 high Jan.14) and finally 1.1510 (200-week SMA). On the other hand, a break below 1.1300 (weekly low Jan.21) would target 1.1272 (2022 low Jan.4) en route to 1.1221 (monthly low Dec.15 2021).