EUR/USD weaker on dollar strength and AUD/USD Analysis By Forex Forum, Jan-03, 2022
EUR/USD extends the rejection from recent tops in the 1.1380/90 band and slowly approaches the 1.1300 neighbourhood, where the 20-day SMA also coincides.
The deep knee-jerk in spot came on the back of persistent dollar upside, which is in turn sustained by the move higher in US yields.
Earlier in the euro docket, Markit's final Manufacturing PMI in Germany came at 57.4 in December and 58.0 in the broader Euroland. Across the pond, the Manufacturing PMI dropped marginally to 57.7 in the same period ahead of November's Construction Spending.
So far, spot is losing 0.67% at 1.1306 and faces the next up barrier at 1.1386 (monthly high November 30) followed by 1.1464 (weekly high Nov.15) and finally 1.1520 (200-week SMA). On the other hand, a break below 1.1273 (weekly low Dec.29) would target 1.1221 (weekly low Dec.15) en route to 1.1186 (2021 low Nov.24).
On the other hand, Both U.S. and South African economic data are scheduled for today with U.S. Manufacturing PMI being the standout which is set for yet another decline. Trader's should keep an eye out for any significant deviation from the estimates while exercise sound risk management technique.
The formation of the bull flag pattern (blue) extends into 2022 with USD/ZAR bears refusing for a topside breakout. The pullback comes as profit taking around the 16.0000 psychological level along with the fundamental risk on sentiment pushes prices lower.
Price action shows USD/ZAR trading near short-term support at the 20-day EMA (purple) which may provide a springboard for bulls to re-enter the fray. Channel resistance comes back into consideration (black) while traders look for the all important break above 16.0000 which should open up moves towards the 38.2% Fibonacci level at 16.3547.
16.3547 – 38.2% Fibonacci level
Channel resistance (black)
20-day EMA (purple)
50-day EMA (blue)
15.4289 – 50% Fibonacci level
Elsewhere, AUD/USD has seen quite a sharp pullback in recent trade, dropping from Asia Pacific levels near 0.7250 to current levels underneath 0.7220 upon the arrival of US market participants ahead of the US open. Volumes during the Asia Pacific and early European sessions were much lower than normal and roughly in line with that seen during last week's thinned holiday trade given the closure of Australian and UK financial markets on Monday. Thus, as trading volumes have started to pick up for the US session, markets seem to have found a little conviction, with the conviction in FX markets on Monday being a preference towards a stronger dollar.
This has weighed on the Aussie, which looks on course to test the key 0.7200 level shortly. At current levels, AUD/USD is trading about 0.7% lower on the session and is the worst performer amongst its G10 peers, with downside in the prices of key Australian metal exports (Copper -1.5%, Gold -1.0%) not helping. With the pair having dropped under short-term trendline support, more selling may well be in store.
The Aussie's performance is broadly in fitting with G10 FX markets adopting a more defensive/risk-off bias on Monday, with the safe-haven dollar and yen outperforming despite stocks in Europe and the US (in pre-markets, at least) trading higher. There isn't any one theme or new developments that can be pointed at as to why FX markets are in a more risk-off mood, but traders may be taking some profit on risk-sensitive currencies after their recent run of strength.
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