Euro Leaks Lower, US Dollar Aided by Fed Hikes and Yields. Will EUR/USD Fall?

[MongiIG]

EUR/USD, EURO, US DOLLAR, FED, FOMC, USD/JPY, HANG SENG, TECH - TALKING POINTS

• US Dollar strength pushes EUR/USD toward lower end of the range
• APAC equities were mixed but tech stocks continue to be undermined
• What will the FOMC meeting minutes hold for EUR/USD?

 

 

The Euro has moved lower against a surging US Dollar as expectations for aggressive hawkishness from the Fed continues despite some recent dovishness.

President of the Federal Reserve Bank of Minneapolis, Neel Kashkari, appeared to be swimming against the rate hiking tide in comments he made overnight.

Maintaining his dovish credentials, he stated that he thought that inflation would return to the low levels seen prior to the pandemic once the Covid shock had passed. It should be noted that he will be non-voting member of the FOMC in 2022.

Treasuries maintain their losses in the Asian session with the benchmark 10-year bond trading near 1.65%. USD/JPY made 4-year high, trading at 116.35 just after the open in New York overnight.

This higher yield environment continues to impact the tech indices globally. After the Nasdaq fell 1.33% in the North American cash market, the futures contract has continued lower in afterhours trading.

Today saw the Hang Seng Tech index fall by more than 4% at one stage. Tencent revealed that it had divested itself further from the sector by selling its’ stake in Singapore’s Seas Ltd this week.

Korea’s Kosdaq index is also notably lower, pulling the Kospi down in the process. The other main bourses across APAC were relatively unchanged.

G-10 currency markets appeared to be taking a breather today, with the US Dollar index (DXY) little changed.

Further ahead, the US will see some data on mortgage applications, jobs numbers and PMI figures. Later in the day, the December FOMC meeting minutes will be released.

 

EUR/USD TECHNICAL ANALYSIS

EUR/USD continues to trade within an overall range of 1.11861 – 1.13865 since mid-November.

The high of 1.13865 is near a pivot point of 1.13830 and the 55-day simple moving average (SMA), currently at 1.13847. This could be a resistance zone.

Support might be found at the previous lows and pivot points of 1.12347, 1.12277, 1.12219 and 1.11861.

Chart created in TradingView

 

Written by Daniel McCarthy, Strategist for DailyFX.com. 5th Jan 2022