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EUR/USD: Bulls fending off bearish tones ahead in thin trade

  • EUR/USD is correcting a slice of last week's closing offer in thin liquidity and holiday markets. 
  • EUR/USD dropped on Friday with a safe haven bid in the greenback and made a North American session low of 1.1356 from a 1.1473 Asian high.

Risk-off sentiment soared last week and US equities had their worst week in a decade as political and economic risks mount on both mainland Europe, in the UK and the USA. The US government shutdown sentiment had been weighing on risk appetite during the week and the confirmation of such lead stocks lower and the and yen and US dollar higher. EUR/JPY fell beneath October's low which subsequently helped the euro bears on their quest below the 1.15 handle to get the price below the 55 DMA and daily cloud base. 

ECB sentiment weighs

Euribor futures prices were rallying on Friday which highlights that the ECB will likely be cautious in 2019. "While we remain of the view that the current economic outlook still allows the ECB to move in September 2019, persistently weak economic data in early next year could therefore not only change the ECB’s mind," analysts at Rabobank argued. 

  • The United States Economy and Politics in 2019

Meanwhile, markets will now be in holiday mode, meaning that liquidity will be thin with the majority of the major FX centres. On the data front, markets will look towards the December US job report released Friday, Jan 4th. Analysts at TD Securities explained that in the context of pessimistic market sentiment, they expect a payrolls rebound to 190k for December to be interpreted as slightly hawkish." Surveys published so far suggest payrolls likely remained firm, which should keep the unemployment rate unchanged at 3.7%. We also anticipate wages to rise 0.3% m/m, bringing the annual print slightly down to 3.0%."

EUR/USD levels

EUR/USD's bearish closing candle leaves a bearish tint on the charts where price had otherwise been looking for a test above the 1/.15 handle. Instead, the price has failed again and dropped to the cloud base and tests the 20-DMA. "Dips lower should find initial support at the 20-day ma at 1.1359 ahead of the 1.1267 end of November low," analysts at Commerzbank argued. On the upside, a break of 1.15 the figure opens 1.1559 and 1.1649 resistances. 


 

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