Forex world

December 16, 2022

EUR/USD marches towards 1.0700

- EUR/USD pokes intraday top, reverses the pullback from six-month high.

- Hawkish ECB statements favor EUR/USD bulls ahead of EU/German PMIs for December.

- Final prints of Eurozone inflation also need observing for clear directions.

EUR/USD buyers attack intraday high near 1.0660 as the US Dollar fades the previous day’s corrective bounce off the six-month low heading into Friday’s European session. Also keeping the major currency pair firmer are the hawkish concerns surrounding the European Central Bank (ECB). However, the cautious mood ahead of the key activity data from Germany, the Eurozone and the US seems to challenge the pair buyers of late.

US Dollar Index (DXY) drops 0.35% intraday as sellers approach the daily bottom surrounding 104.20. In doing so, the greenback’s gauge versus the six major currencies fails to trace the firmer US Treasury yields amid a sluggish session.

Dicey markets and mixed US data could also be linked to the EUR/USD pair’s latest run-up. On Thursday, the US Retail Sales flashed -0.6% MoM figure in November versus 0.1% expected and 1.3% prior. Further, manufacturing survey details from Philadelphia Fed and New York Fed came in disappointing for the said month whereas Industrial Production eased in November and the Jobless Claims also dropped for the week ended on December 09.

However, the global central bankers’ rush towards higher rates and readiness to keep them high for longer, to battle the inflation woes, seemed to have triggered the risk-off mood and underpinned the US Dollar demand. On the same line could be the latest Sino-American tussles as Reuters reported that the Biden administration on Thursday added Chinese memory chipmaker YMTC and 21 "major" Chinese players in the artificial intelligence chip sector to a trade blacklist, broadening its crackdown on China's chip industry.

It’s worth noting, however, that ECB President Christine Lagarde’s clear signals for more rate hikes, by saying, "Obvious that we should expect 50 bps hikes for period of time," seemed to have propelled the Euro pair on late Thursday, as well as keeping buyers hopeful of late.

Even so, the EUR/USD pair traders should wait for the final readings of the German and Euro Area activity numbers for December for confirmation. Given the upbeat forecasts for the stated numbers, the major currency pair could remain firmer. However, the likely sluggish prints of the Eurozone inflation, per the final readings of the Harmonized Index of Consumer Prices (HICP) for November, could probe the bulls. Additionally, forecasts surrounding the US S&P Global PMIs appear mixed as Services activities are likely to improve but not the manufacturing ones. Even so, both these sectors are expected to print the below 50 figure that suggests a contraction in activities and could weigh on the US Dollar in case of a downbeat outcome.

Technical analysis

Unless breaking a five-week-old ascending support line, around 1.600 by the press time, EUR/USD buyers remain hopeful of refreshing the monthly high, currently around 1.0735.


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