November 22, 2021 15:27:22
European lockdowns are hitting confidence in the region and its currency. Austria is good indicator for where potentially the rest of the zone is heading. That looks like increasing numbers of Covid cases and more social restrictions. Economic activity will be hit which means 2022 will kick off on a weak footing.
Tomorrow’s PMI data are relatively positive and may be looked through due to recent developments. No doubt any miss will be seized upon. We know the ECB is already dovish in its outlook. A continuation of the pandemic simply gives policymakers more reasons to go slow. Speculation will grow of an extension of the emergency bond buying programme after March.
EUR/USD touches major support
When long-term levels are hit and fresh lows made, it’s worthwhile looking at extended time frames to check significant price zones. We can see on the monthly chart that the five-month downtrend has accelerated since breaking support above 1.15.
Prices have just made multi-month lows on Jay Powell being reappointed Fed Chair for another term this afternoon. The world’s most traded currency pair is now sitting on long-term trendline support going back to the July 2008 high.
In the short-term we are oversold. But we will have to move above 1.1372 to counteract the strong bearish momentum. Major resistance above here comes in at 1.1513/24. Otherwise, selling rallies has been the strategy. More downside targets big figures like 1.12 and below.
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