Eur/usd Drops To Fresh Lows Around 1.1220, Looks To Key Data, Fomc

Eur/usd Drops To Fresh Lows Around 1.1220, Looks To Key Data, Fomc

  • Trade Ideas
  • Forex
  • 2021, 24 November

Brief:

  • EUR/USD loses the grip and clinches new lows at 1.1220.
  • German Business Climate surprised to the downside in November.
  • US PCE, FOMC Minutes take centre stage later in the NA session.

The single currency remains under pressure and depreciates further, motivating EUR/USD to clock new cycle lows around 1.1220 on Wednesday.

EUR/USD looks to domestic, US data and the FOMC Minutes

EUR/USD stays depressed and regains the downside following Tuesday’s moderate advance to levels past 1.1270 on Wednesday. It is worth recalling that above-expectations flash PMIs in the euro area underpinned the daily corrective upside in spot earlier in the week.

The better note in the greenback keeps the pair under scrutiny and close to the area of fresh 16-month lows near 1.1220 recorded on the previous session. Higher US yields, particularly boosted after J.Powell was re-appointed to the Fed, continued to bolster the upside momentum in the dollar, while the persistent Fed-ECB policy divergence adds to the downtrend in spot.

Later in the session, the German Business Climate tracked by the IFO survey is due while the focus of attention is later expected to shift to the US docket, where inflation figures measured by the PCE, usual weekly Claims and the release of the FOMC Minutes are all scheduled.

What to look for around EUR

EUR/USD seems to have found some decent contention near the 1.1200 yardstick so far this week. The pair continues to suffer the ECB-Fed policy divergence, while the sharp increase in COVID-19 cases in Europe also adds to the deteriorated outlook for the single currency in the last part of the year. Also weighing on the pair, the loss of momentum in the economic recovery in the euro area - as per some weakness observed in key fundamentals – is also seen pouring cold water over investors’ optimism on the economic recovery.

Key events in the euro area this week: German IFO (Wednesday) – German GfK Consumer Confidence, German Final Q3 GDP, ECB Accounts, ECB’s Lagarde (Thursday) – ECB’s Lagarde (Friday).

Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the region. Increasing likelihood that elevated inflation could last longer. Pick-up in the political effervescence around the EU Recovery Fund in light of the rising conflict between the EU, Poland and Hungary on the rule of law. ECB tapering speculations.

EUR/USD levels to watch

So far, spot is losing 0.22% at 1.1223 and faces the next up barrier at 1.1374 (low Nov.18) followed by 1.1464 (weekly high Nov.15) and finally 1.1609 (weekly high Nov.9). On the other hand, a break below 1.1220 (2021 low Nov.24) would target 1.1185 (monthly low Jul.1 2020) en route to 1.1168 (low Jun.19 2020).

Suggestion:

Sell below 1.1245 for 1.1190 and 1.1170

Else

Buy above 1.1245 for 1.1260 and 1.1275

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