Home Forex EUR/USD continues downward trend

EUR/USD continues downward trend

by Jonathan Adams
euro

The pair continues lacklustre trading, closing at 1.1022

The risk-off first deepened yesterday amid travel restrictions in Hong Kong due to the endemic in parts of China, but sentiment improved in US trading.

A number of smaller currencies such as the AUD, SEK, NOK, CZK, and PLN rebounded. USD/JPY hovered around 109. The Swiss franc came off a near 3-year top against the euro, closing at 1.0725. The dollar also reversed its intraday gain.

US data were mixed as there were less orders and strong consumer confidence but were largely ignored as driver for FX trading.

EUR/USD continued lacklustre trading. The pair tested the 1.10 level, but the subsequent rebound was unconvincing. The pair closed little changed at 1.1022. Yesterday’s risk-rebound supported the higher-yielding/high risk currencies but failed to inspire EUR/USD. The pair continued its downward trend. The EUR/USD deteriorated after its break below 1.1066/40.

After bouncing back on WS yesterday, Asian equities also showed signs of dropping overnight. Hong Kong stock market opens after the Chinese Lunar New Year break (-2.5%). The offshore yuan (USD/CNH 6.96) rebounded after coming close to the barrier of 7 earlier this week.

Australia’s inflation for the fourth quarter increased slightly more than expected at 1.8% Y/Y in favour of an AUD comeback (AUD/USD 0.677).

Meanwhile, the U.S. Federal Reserve meets on Wednesday and rates are expected to remain unchanged. The Fed may address technical issues such as IOER and balance sheet.

Sterling extended its ‘corrective’ decline against the euro yesterday. The dispute on fishing rights between the EU and the UK might have impacted the sterling as well. Markets are keeping a watch on tomorrow’s BoE policy meeting.

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