Forex world

December 09, 2022

EUR/USD aims to close a three-week rise above 1.0600

- EUR/USD grinds higher during three-day uptrend, braces for the third consecutive weekly run-up.

- Downbeat US data, Treasury bond yields weigh on US Dollar.

- Challenges to sentiment fail to renew greenback buying ahead of next week’s FOMC.

- US data concerning consumer confidence, inflation expectations could help buyers keep the reins.

EUR/USD buyers approach the five-month high marked on Monday amid the broad US Dollar weakness during early Friday. In doing so, the major currency pair prints the three-day winning streak after rising for two consecutive weeks in the last.

That said, the US Dollar Index (DXY) prints a three-day downtrend near 104.60, down 0.21% intraday as traders brace for the next week’s busy schedule comprising the Federal Reserve (Fed) monetary policy meeting and the inflation data, not to forget today’s consumer-centric figures. In doing so, the greenback’s gauge versus the six major currencies traces the US Treasury bond yields while justifying the downbeat US data.

On Thursday, US Initial Jobless Claims matched 230K market consensus for the week ended on December 02, versus the upwardly revised 226K prior. Further, the four-week average also printed 230K figure compared to 229K in previous readings. Earlier in the week, the US Goods and Services Trade Balance deteriorated to $-78.2 billion versus $-79.1 billion expected and $-73.28 billion prior. Further, the final readings of the Unit Labour for Q3 eased to 2.4% QoQ versus 3.5% first estimations.

It should be noted that US Treasury Secretary Janet Yellen’s rejection of recession woes and hawkish expectations from the Fed fails to underpin the DXY rebound. US Treasury Secretary Yellen said on Thursday night that "Recession is not inevitable," while also declining to say whether the dollar had peaked against other currencies.

Talking about the risk catalysts, news from the Wall Street Journal (WSJ), suggesting the US readiness for human rights sanctions on Russia and China, recently weighed on the market’s risk appetite. However, the previous headlines signaling China’s interest in rebuilding ties with the US and easing the Zero-Covid policy tried to defend the optimists.

While portraying the mood, S&P 500 Futures print mild losses while the US 10-year Treasury bond yields remain pressured around the three-month low marked on Wednesday.

To sum up, the broad US Dollar weakness can keep the EUR/USD bulls hopeful ahead of the preliminary readings of the Michigan Consumer Sentiment Index for December, expected 53.3 versus 56.8 prior. Also important to watch will be the University of Michigan’s (UoM) 5-year Consumer Inflation Expectations for the said month, 3.0% previous readings. It’s worth observing that the anxiety ahead of the next week’s Federal Open Market Committee (FOMC) meeting could restrict the pair’s moves.

Technical analysis

A clear upside break of the weekly triangle joins bullish MACD signals and firmer RSI (14) to favor the EUR/USD bulls.


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