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Euro consolidates around 1.1350

The EURUSD pair rallied 0.36% to 1.1327, with an intraday high of 1.1342 on Wednesday, December 22. The single currency started to strengthen right after the European opening and picked up momentum during the North American trading session. The gains were capped by weakness in the EURGBP cross.

During the North American session, the euro was underpinned by broad-based dollar weakness, an upturn in European and US stock indices, as well as a decline in 10-year UST yields.

The demand for risk-sensitive assets climbed on the back of Omicron-related news. According to the latest research and preliminary data from South Africa and the universities of Edinburgh and Strathclyde, the new variant appears less likely to land people in the hospital with Covid-19 than the Delta strain. The FDA has approved Pfizer's antiviral COVID-19 pill, making it the first at-home treatment. Meanwhile, US macro data receded into the background.

US consumer confidence improved further in December. Existing home sales rose in November (up for the third month in a row). Q3 GDP expanded at an annual rate of 2.3%, exceeding the preliminary estimate of 2.1%.

Today’s macro agenda (GMT+3)

16:30 Canada: GDP (October)

16:30 US: personal income and spending, PCE price index, durable goods (November), initial jobless claims (Dec. 4-week average)

18:00 US: new home sales (November), University of Michigan consumer confidence (December)

18:00 US: University of Michigan inflation expectations (December)

Current outlook

By the time of writing, major currencies were showing mixed performance. The Japanese yen and Swiss franc were trading in the red, pointing to continued demand for risk assets.

During today’s North American session, a slew of macro data is due out, potentially exerting an impact on the FX market ahead of the long weekend. On Friday, the FX market will see a shortened schedule. Today’s highlights include PCE price index and durable goods for November.

Technical analysis  

EURUSD stopped rising at the 90-degree angle of the Gann fan (1.1340). Price action is currently hovering around 1.1337. A slight correction is expected during the first half of today’s trading session. During the North American session, we expect the key pair to retrace to its weekly high of 1.1350. Volumes are thin, so there could be some unpredictable swings in either direction. Support is located at 1.1305.

Bottom line: the euro closed to the upside on Wednesday amid heightened demand for risk-sensitive assets. Demand climbed due to a positive news flow surrounding the new Omicron strain. The external backgdrop looks positive ahead of the Christmas holidays. After a correction to 1.1320, the single currency is likely to retrace to its weekly high of 1.1350.

EURUSD-231221

 

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