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Euro draws support from flight to safe haven assets

The EURUSD pair fell 0.35% to 1.1291 on Monday, November 29. Risk assets opened to the upside, shaking off Friday's rout. Calm returned to global markets as investors reconsidered their worst-case scenarios for the new coronavirus strain. Equity benchmarks closed higher, while UST yields retreated.

Since the euro rose to 1.1331 on Friday, the pair dropped to 1.1258 on Monday as part of a correction. Price action bounced off the 55-day SMA (balance line) during the North American session.

Today’s macro agenda (GMT+3) 

  • 11:55 Germany: unemployment change (November), flash CPI (November)
  • 13:00 Eurozone: flash CPI (November)
  • 16:30 Canada: GDP (Q3)
  • 18:00 US: Fed Chair Jerome Powell speech
  • 18:00 US: CB consumer confidence (November)
  • 18:00 US: Treasury Secretary Janet Yellen speech
  • 18:30 US: New York Fed President John Williams speech
  • 21:00 US: Federal Reserve Vice Chairman Richard Clarida

Current outlook

In Asian trading, a picture similar to that on Friday is shaping up. Oil, AUDUSD and NZDUSD have retraced to their lows. Market sentiment deteriorated after The Financial Times (FT) shared comments from Moderna CEO Stephane Bancel that the South African variant of the coronavirus, dubbed Omicron, was exacerbating pandemic challenges.

Bancel said Covid-19 vaccines are unlikely to be as effective against Omicron variant as they have been. Due to the large number of mutations, existing vaccines may need to be modified. Vaccine resistance could lead to more illness, hospitalizations and prolong the pandemic.

President Joe Biden said the US has not yet closed borders, although Omicron raises concerns. Treasury Secretary Janet Yellen reminded that a new vote on the national debt ceiling is coming up in Congress.

The economic calendar is an empty slate today. Notable speeches include those by Jerome  Powell and Janet Yellen.

Technical analysis

From the 55-day SMA, price action increased to 1.1327. The euro again acts as a defensive asset today along with the yen and the franc. If the Aussie and New Zealand dollars fail to bounce back from today's lows, the euro will gain strength from a flight to safe haven assets.

S&P 500 futures fell, but did not sink to recent lows. Market participants await the opening of the North American session. For buyers, resistance is at 1.1337, after which the road to 1.1386 will be open.

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