Euro slips back below 1.13

The euro is in negative territory on Monday, giving up some of Friday’s huge gains. In the North American session, EUR/USD is trading at 1.1268, down 0.36% on the day.

Omicron jitters boosts euro

Uncertainty led to panic in the financial markets last week, as the Omicron variant of Covid-19 was detected outside of South Africa, leading to fears that the variant could cause a massive spike in Covid cases. This led to the US dollar losing ground on Friday to the traditional safe-havens, the Swiss franc and the Japanese yen. The euro also posted impressive gains, climbing 0.90%, its best one-day gain in 2021.

Despite Friday’s strong performance, the outlook for the euro remains bearish. Let’s not forget that the EUR/USD has fallen 2.50% in November and has not had a winning month since July. The currency will likely struggle to make progress above the 1.13 line, barring a collapse in US Treasury yields.

Even without the headache of the spread of Omicron, Europe was in the midst of a fourth wave of Covid, and the massive spike in cases in Germany and elsewhere could derail the EU’s tenuous recovery. Things were looking rosy until now, with the EU forecasting a strong 5% growth rate for 2021, but that projection is in jeopardy as lockdowns are looking more likely around the normally busy Christmas shopping season.

The Omicron variant has made a splash for only a few days, but already a Fed President has weighed in on this latest Covid development. On Friday, Atlanta Federal Reserve President Raphael Bostic said he remained open to accelerating the pace of the Fed’s bond taper as well as one or two rate hikes in 2022. Bostic noted that previous variants had caused less economic damage than the delta variant and remained hopeful that the US economy would carry through the next wave of Covid.

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 EUR/USD Technical

  • EUR/USD has support at 1.1229. This is followed by support at 1.1135
  • There is resistance at 1.1373 and 1.1423

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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