The price returned to the December range
On Tuesday, January 18, trading in the euro ended with a decline. The single currency fell against the US dollar by 0.70% to 1.1326. Sales intensified against the backdrop of rising yields on US government bonds, as well as falling futures on US stock indices. In the American session, the fall of the indices accelerated. The S&P500 fell 1.51% to 35,368.47 and the Nasdaq fell 2.6% to 14,506.90. All risky assets came under pressure.
Scheduled statistics (GMT +3):
At 12:00 eurozone will publish the current account balance for October.
At 12:30 in the UK, the house price index for November will be released.
At 16:30 Canada will present the consumer price index for December, as well as wholesale sales for November.
At 16:30 the US is to publish data on building permits and home construction for December.
At 17:15 the head of the Bank of England E. Bailey will make a speech.
At the time of writing, the euro is worth 1.1333. Major currencies are traded in the positive zone. The dollar index is being corrected after yesterday's growth.
A combination of factors related to the upcoming FOMC meeting put pressure on US equities, pushed up US Treasuries and US bonds and had a significant impact on the US dollar. This month's FOMC meeting is scheduled to begin a week later on January 25 and end the next day.
Market participants expect the Fed to launch an aggressive streak of rate hikes to contain rising inflation, which is currently locked at 7% y/y. The market is pricing in three or four rate hikes this year.
Buyers defended support at 1.1385 for 43 hours. After its breakdown, the fall of the pair accelerated to 1.1314. The price returned to the December range of 1.1225-1.1385. Selling ended at the 135th degree from the top of 1.1483.
Trendline from 1.1272 low passes through 1.1305. At the auctions in Asia, the fall in futures for American stock indices continued. The yield on 10-year US bonds is at its maximum. There is an opinion that the price has not reached the calculated level for a rebound. Considering that the fall stopped at 135 grams, the correction may begin without a test of the level of 1.1300. The balance and trend lines are at 1.1380. They are the target area for buyers. Sellers will use all the negative factors to return the rate to 1.1225 as soon as possible.
Summary: on Tuesday, the euro closed in the red against the backdrop of a general strengthening of the dollar, rising government bond yields and falling US stock indices. Market participants expect the Fed to launch an aggressive series of rate hikes to contain rising inflation. The breakout of resistance at 1.1385 on January 12 was unsuccessful, the price bounced back. With continued uncertainty, the euro / dollar will look for a new price level that will suit buyers and sellers.