EUR/USD picks up the pace and extends the bounce off 1.1400

: George Solotarov; 17 January 2022; Hits: 362

EUR/USD picks up the pace and extends the bounce off 1.1400

The optimism seems to have returned to the single currency and now lifts EUR/USD back to the 1.1430 zones at the beginning of the week. Following Friday’s moderate pullback to the 1.1400 neighborhood, EUR/USD regains upside traction amidst the resumption of the risk-on trade among market participants and the weaker greenback, while earlier results in the Chinese calendar also collaborate with the upbeat mood. The greenback starts the week on the negative ground following disheartening results from the US docket on Friday despite the decent move higher in US yields.

The upside bias in the pair looks underpinned by the climb in yields of the 10y German Bund to the -0.03% zone, adding to Friday’s uptick. In the domestic calendar, final Italian inflation figures for December will be the sole release, while the Eurogroup is expected to meet later in the day. EUR/USD came under pressure after hitting new tops in the 1.1480 regions. The outlook for the pair looks improved in past sessions, particularly after leaving behind the 4m line on January 12, today around 1.1380.

In the meantime, 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. ECB officials have been quite vocal lately and now acknowledge that high inflation could last longer in the euro area, sparking at the same time fresh speculation regarding a move on rates by the central bank by end of 2022. On another front, 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.

So far, the spot is gaining 0.10% at 1.1426 and faces the next up barrier at 1.1482 (2022 high Jan.14) followed by 1.1501 (100-day SMA) and finally 1.1511 (200-week SMA). On the other hand, a break below 1.1398 (low Jan.14) would target 1.1351 (55-day SMA) en route to 1.1272 (2022 low Jan.4).