Market Analytics and Technical Considerations
Key Points
- EUR/USD trying to breach the 1.05 key level.
- The next move of the pair will depend heavily on the dollar index and US data.
- Rising Covid Rates in China May Bring Back Demand for Dollar Haven.
FUNDAMENTAL Landscape FOR EUR/USD
The Euro has had a good start to the London session, gaining approximately 100 pip against the dollar from the lows of the Asian session around 1.0340. The pair achieved its highest closing since June 2022 last week when it closed above the resistance region near 1.0350. The increase appears to be mostly led by the dollar at this point, but recent surprises in the Eurozone’s data releases and aggressive comments from ECB policymakers may have contributed to the positive sentiment surrounding the Euro.
The escalating Covid protests in China caused downward pressure on the pair during the Asian session. As anger over the “Covid-Zero” plan continues to grow, violence broke out over the weekend in Shanghai. This morning, Chinese officials reaffirmed their commitment to slowing the rate of cases growth while reiterating their desire to limit the impact on the economy. For the seventh day in a row, the Chinese authorities announced record Covid levels.
Following the holiday break for Thanksgiving last week, US markets are back to usual today. The Asian session was bullish for the dollar index as haven demand increased. However, as European trade started to decline into November lows of 105.30, the index was unable to hold onto those advances. In the beginning of the week, there is a chance that the EUR/USD makes a run for the 1.0500 critical point and above before Eurozone and US data releases may put an end to the rise.
The only significant events on the agenda for the upcoming day are lectures by aggressive Federal Reserve officials James Bullard and John Williams, which could stop the dollar’s decline. Christine Lagarde, president of the European Central Bank, will also speak to a European Parliament in Brussels later on today.
Technically speaking, the EUR/USD pair ended last week with a candle closure above a significant resistance region near 1.0350. Before closing above for the first time since June 2022, the pair has experienced two unsuccessful efforts to close over this mark in recent days.
For the first time as of June 2021, the pair is currently trading above the 200-day MA, which may provide bullish traders on the euro further motivation. The pair will continue to be vulnerable to a decline if it fails to post a daily candle closure just above 1.05 area, which remains crucial for any additional rise.
