Daily Market Recap - EURUSD

The Euro is trading lower against the US Dollar on Wednesday after initially pushing higher earlier in the session in an attempt to capitalize on Tuesdays momentum. The EURUSD bulls ultimately failed to clear above the 20 days Moving Average, and with a late comeback in the US Dollar, the pair is now down 0.38 percent for the day, stabilizing just above the 1.21 mark.

Traders are reacting to the news from the US Federal Reserve that the central bank is considering tapering its covid-19 stimulus program in light of the improving economic conditions in the country. Latest inflationary indicators have come in above expectations with the CPI year over year figure rising to 1.4 percent, suggesting consumption levels remain relatively healthy despite the ongoing crisis.

Covid-19 cases are continuing to soar worldwide, with the new variants of the virus wreaking havoc due to its higher rate of transmission. EU nations are contemplating issuing further restrictions to combat the spread as the level of vaccinations given remains very low. The figure for European countries is barely around 1 percent of the population while the US is reaching the 3 percent mark.

US Dollar bulls are encouraged from the tapering of easing by the Fed while also benefiting from safe-haven demand. This in turn is applying pressure on the Euro which looks set to close the day lower and continue on its sideways trajectory until a stronger direction is found.

(Chart Source: Tradingview 13.01.2021)

From a technical perspective, momentum in the EURUSD remains down since the drop from the 1.23 resistance handle. The pair will likely trade within the 1.22 and 1.21 level in the near term with a bias to the downside. The 0.236 Fibonacci retracement level from January highs will be the first line of support, with the following level at 1.20. As it stands, the outlook on the EURUSD appears to favor a further correction towards the 1.20 mark where value buyers are expected to return to the market.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.