Euro Firmed as the US Dollar Paused Amid Fed and China Factors. Where to for EUR/USD?

EURO, EUR/USD, US Dollar, Fed, China, Crude Oil, NZD/USD – Talking Points

• Euro found support after the US Dollar took a breather from its ascent
• Fed speakers reminded markets that rate rises are coming, even if they are smaller
• If the Fed keeps hiking and China lockdowns, will EUR/USD resume its downtrend?

The Euro steadied through Asian trade today after Monday’s tumultuous start to the week that saw EUR/USD plunge.

The US Dollar gained on the back of Fed speakers maintaining their hawkish stance that also saw stocks undermined.

A surge in Covid-19 cases in China also undermined risk assets with fears that severe lock downs may persist there.

San Francisco Federal Reserve President Mary Daly and Cleveland Fed President Loretta Mester re-affirmed that rates will be hiked, but perhaps at a slower pace.

Last week saw a number of Fed speakers use slightly more hawkish language overall but the message appears to be is that rates will rise, but potentially less aggressively.

After several previous rate rises of 75 basis points, the market has a 50 basis point hike priced in for next month’s Federal Open Market Committee (FOMC) meeting.

Wall Street finished their session in the red with the Dow Jones losing -0.13%, the S&P 500 dropping -0.39% and the Nasdaq -1.09% lower. Futures are pointing to a steady start to their day ahead.

APAC equites have mostly seen small gains except for Hong Kong’s Hang Seng Index (HSI), that is in the red.

Crude oil also wild price swings overnight but has been relatively stable in Asia today with

the WTI futures contract above US$ 80 bbl while the Brent contract is approaching US$ 88 bbl. Gold managed to eek an uptick, trading above US$ 1,740.

New Zealand’s trade deficit for October was better than anticipated today. It came in at NZD -1.615 billion rather than NZD -2.129 billion forecast. NZD/USD has seen modest gains so far today. The RBNZ will be making a decision on rates tomorrow.

RBA Governor Philip Lowe will be speaking shortly, as will a number of ECB, Fed and Bank of Canada officials.

Canadian retails sales data will be released later, as will a gauge on US manufacturers sentiment from the Richmond Fed.

The full economic calendar can be viewed here.

EUR/USD TECHNICAL ANALYSIS

After closing back inside the 21-day simple moving average (SMA) based Bollinger Band last week, EUR/USD rolled over and moved lower. Such a move might indicate that a reversal may unfold.

Support could be at the breakpoints of 1.0198 and 1.0094 or further down at a prior low of 0.9936.

On the topside, resistance could be at the previous peaks of 1.0482 and 1.0615.

Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

Please contact Daniel via @DanMcCathyFX on Twitter