- EUR/USD breaks its two-day uptrend and renews an intraday low.
- The cautious sentiment is similar to dollar buyers before key data releases and ignores dismal returns.
- US inflation expectations are recovering, and ECB politicians are divided on proceeding.
- In December, this quarter’s US GDP and CB consumer confidence will be key events. Omicron and BBB will also be in the spotlight.
The EUR/USD price offers bids to renew its intraday low at 1.1270 as we head into Wednesday’s European session.
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As a result of the stimulus from the US and Omicron, the major currency pair has risen in recent days. However, the market is worried about virus infections worsening, geopolitical concerns, and fiscal stimulus updates ahead of key US data this week.
After Europe announced new restrictions on virus-related activities, US President Joe Biden’s expectations for a Better Recovery (BBB) plan have faded. Moreover, according to the 10-year break-even rate of the St. Louis Federal Reserve (FRED), the recent increase in inflation expectations exacerbated the bearish sentiment.
Additionally, news that the US had appointed a new Tibetan coordinator amid tensions with China is expected to ease risk appetite and stimulate demand for the US dollar as a safe haven.
Meanwhile, the ECB’s reluctance to combat inflation puts pressure on it, in contrast to the Fed’s clear view of the EUR/USD exchange rate. For example, the ECB politician and chairman of the Slovak central bank Peter Kazimir recently stated: “There is a risk that inflation will persist longer.”
Despite Wall Street indicators showing a three-day downtrend, the US 10-year Treasury yield fell two basis points (bps) to 1.465%, and the S&P 500 futures fell 0.13% during the day. Furthermore, the US Dollar Index (DXY) is in a two-day downtrend, up 0.12% to 96.55 over the day.
The lack of market movement during the Christmas season at the end of the year might limit the short-term EUR/USD price even if the bears remain in control. Nevertheless, Omicron updates and US incentive talk could keep traders ahead of the final US GDP data for the third quarter and December’s central bank’s consumer confidence index.
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EUR/USD price technical analysis: Consolidating around 20-SMA
The EUR/USD price is consolidating in a tight range, providing no clue about the directional bias. This can be due to a lack of volume in the market. However, the price has still done a 38% average daily range so far, which is a usual figure. Overall, the pair is expected to stay within the 1.1250 to 1.1330 area.
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Saqib Iqbal
