EUR / USD holding gains near daily high, bulls expect sustained move past 1.1300

• Risk appetite undermined the USD as a safe haven and helped EUR / USD gain traction.
• The euro also benefited from some strength driven by the EUR / GBP cross.
• The lack of strong follow-up buying warrants some caution for bull traders.

EUR / USD maintained its modest intraday gains heading into the American session, and the bulls are now expecting a sustained move beyond the 1.1300 round level.

The pair managed to regain some positive traction on Wednesday and built on the late bounce the day before from a low of a week and a half, around the 1.1230-25 region. An extension of the recent rally in equity markets undercut the safe-haven US dollar and extended some support to the EUR / USD pair.

Global risk sentiment remained well supported by easing fears about the potential economic consequences of the new Omicron variant of the coronavirus. Market optimism received an additional boost after Pfizer said that the third dose of its COVID-19 vaccine neutralized the Omicron variant in laboratory tests.

The shared currency further benefited from some strength driven by the crossover coming from a sharp rise in the EUR / GBP crossover, sparked by reports of the imposition of new COVID-19 restrictions in the UK. That said, harsh expectations from the Fed helped limit USD losses and limited EUR / USD gains.

Investors seem convinced that the Fed will adjust its monetary policy sooner rather than later to contain stubbornly high inflation. In fact, money markets have been weighing the possibility of an eventual takeoff in May 2022, which should continue to act as a tailwind for the dollar.

Focus now shifts to Friday’s release of US consumer inflation figures, which would influence the Fed’s decision to reduce its stimulus at a faster pace and set the stage for a rate hike. interest. This will drive demand for the USD and provide new directional momentum to the EUR / USD pair.

This makes it prudent to wait for sustained strength beyond 1.1300 before placing new bullish bets around the EUR / USD pair. In the absence of relevant market-moving economic releases, developments surrounding the coronavirus saga will be considered for some business opportunities.

Technical levels