EUR/USD: Bulls Regain Control and Target 1.0900

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  • EUR/USD advances remarkably and marks new highs near 1.0890.
  • The dollar sinks to fresh multi-month lows near 101.50.
  • US Retail Sales and Production Prices disappointed expectations.

The EUR/USD gains strength and hits new yearly highs near 1.0890 on Wednesday.

EUR/USD strengthens on strong USD selling

Bullish sentiment continues to build around the risk complex following the sharp sell-off in the dollar, which hit fresh 8-month lows near 101.50 according to the USD (DXY) index.

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Against this background, EUR/USD reversed recent 3-day weakness and rallied towards the limits of the 1.0890 level, at the same time making new highs in a zone last visited in late April 2022.

Collaborating with the better tone of the single currency come the comments of O.Rehn, member of the Council of the ECB, who suggested that a significant increase in rates in the short term seems justified to keep inflation expectations contained.

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On the national calendar, the results for the month of December in the euro bloc registered an increase in car registrations of 12.8% year-on-year, while the final CPI rose 9.2% year-on-year and 5.2% year-on-year for the CPI. underlying.

In the US, Retail Sales contracted 1.1% MoM in December and Producer Prices fell 0.5% MoM in the same period. Additionally, MBA mortgage applications increased 27.9% in the week to January 13 and Industrial Production contracted 0.7% in December versus the prior month.

The NAHB index, business inventories, TIC flows and the Fed’s Beige Book will be released later in the session.

In addition, the FOMC’s Bostic, Bullard, Harker and Logan will also give statements.

What to expect from the EUR

The EUR/USD pair has regained momentum and is now trading closer to the key round level of 1.0900, always in response to the persistent selling trend surrounding the dollar.

The price action around the European currency should continue to closely follow the dynamics of the dollar, as well as the impact of the energy crisis on the euro bloc and the Fed-ECB divergence.

Returning to the euro zone, the growing speculation about a possible recession in the bloc emerges as a major domestic headwind facing the euro in the near term.

technical levels

For now, the pair gains 0.68% at 1.0860 and faces the next bullish barrier at 1.0887 (18 Jan monthly high), followed by 1.0900 (round level) and finally 1.0936 (April 21 weekly high). of 2022). On the flip side, the break of 1.0776 (weekly low Jan 17) would target 1.0481 (monthly low Jan 6) en route to 1.0443 (weekly low Dec 7).

Source: Fx Street

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