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Euro closes in on 1.15

The EURUSD pair advanced 0.10% to 1.1455 on Thursday, January 13. Gains were seen right from the opening of the European trading session. Price action climbed to 1.1482, from which buyers retreated to 1.1447. The pullback in major pairs coincided with a drop in US stock indices.

Investors started to sell shares on the heels of remarks by Fed Governor Lael Brainard. She said the central bank could start to lift interest rates as early as March to ensure that generati0n-high price pressures will be brought under control. The tech sector took the biggest hit after her speech.

Philadelphia Fed President Patrick Harker favors a March liftoff and 3-4 hikes for 2022. His Chicago counterpart Charles Evans, who sees a similar number of increases this year, said he couldn’t judge the likelihood of the first rally taking place in March. Richmond Fed President Thomas Barkin said that officials will be in a position to start normalizing rates at their March meeting should circumstances support that (higher inflation and job growth in the country).

Today’s macro agenda (GMT+3)

  • 13:00 Eurozone: trade balance (November)
  • 16:30 Eurozone: ECB President Christine Lagarde speech
  • 16:30 US: retail sales (December)
  • 17:15  US: industrial production (December)
  • 18:00 US: Michigan consumer sentiment and inflation expectations for the year ahead
  • 19:00 US: New York Fed President John Williams speech

Current outlook

By the time of writing, the euro was trading at 1.1463. All major currencies are in positive territory. The Japanese yen and the Canadian dollar topped the leaderboard. Demand for risk-sensitive assets rose on news that Chinese developer. Evergrande averted default on its onshore public bonds by gaining investor support to delay early redemption of a 4.5 bln yuan ($707 mln) note.

Buyers are showing weakness despite the morning price recovery to 1.1483. The resistance zone is between 1.1500 and 1.1510. If price action holds above 1.1450 by January 18, then a recovery to 1.1580 could be in the cards. If the euro bulls fail to hold the 1.1450 level, the correction will gain momentum down to 1.1410.

Bottom line: on Thursday, the euro closed in positive territory amid broad-based weakness in the greenback. The gains were capped by a decline in US equities after Fed Govenor Lael Brainard’s speech. Resistance lies in the range of 1.1500-1.1510.




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