The Euro-Dollar exchange rate is fluctuating at 1.1300, putting it on the defensive as the US Dollar recovers with yields and the market’s confidence in the Omicron COVID strain.
The divergence in monetary policy between the Fed and the ECB will manifest itself ahead of the critical press releases.
Perspectives On The Technical Front
EUR/USD CHART Source: Tradingview.com
At the time of publication, the EUR/USD pair was challenging the 100-period simple moving average (SMA) on the four-hour chart, at 1.1280.
The following static support level is situated at 1.1270, and the pair might continue its decline into 1.1240 (fixed level) if this level proves to be a barrier to further gains.
The Relative Strength Index (RSI) signal on the same chart, in the meantime, fell below 50, reinforcing the notion that sellers are attempting to maintain control over the EUR/USD pair’s movement.
On the other hand, the first stumbling block is placed at 1.1300 (psychological level, 50-period SMA), followed by 1.1330 (static level) and 1.1390 (psychological level) (200-period SMA).
An Overview Of The Fundamentals
According to market analysts, after beginning with a tiny positive gap, the EUR/USD has shed its momentum and has fallen beneath 1.1300 in the early market hours of the European day on Monday.
The technical picture for the pair implies that it might suffer further losses in the near term, despite the fact that investors may be reluctant to commit to important positions ahead of this week’s crucial central bank meetings.
The resurgence of Dollar appreciation at the beginning of the week appears to be putting pressure on the EUR/USD pair.
The US Dollar Index, which had finished in the negative area on Friday, was last observed, climbing 0.23% to 96.27 at the time of writing.
In light of the lack of high-quality macroeconomic data announcements and underlying drivers, the Dollar appears to be holding up well versus its peers, with the yield on the 10-year US Treasury note remaining stable at approximately 1.5% over the past several weeks.
It is possible that investors will anticipate that increased concerns about the coronavirus omicron strain harming economic growth in the Euro area will lead the European Central Bank (ECB) to take a more dovish position in the near future.
According to a recent Reuters survey of financial experts, the European Central Bank (ECB) is expected to continue buying bonds worth 40 billion Euros per month until the end of 2022.
Per Reuters, approximately 60% of respondents, or 18 out of 31 respondents, stated that the emergence of new coronavirus strains was the most significant downside risk to the Eurozone economy in the coming year.