Forex Opinion & Analysis

EUR/USD Starts the Week on a Soft Note Amid U.S. Dollar Strength

 

EUR/USD
+0.26%

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The EUR/USD pair fell for a third straight day on Monday as the U.S. dollar strengthened on the back of safe-haven flows fueled by COVID outbreaks in China. New lockdowns were announced in several Chinese cities, triggering concerns about possible supply chain disruptions among investors.

At the time of writing, the EUR/USD pair is trading at the 1.0250 area, 0.73% below its opening price, having retreated from a daily high of 1.0333 earlier in the session to a 10-day low of 1.0223.

On the data front, Germany published lower-than-expected producer inflation data, while the U.S released the Chicago Fed National Activity Index, which dipped into negative territory in October.

However, data had little impact on the EUR/USD pair as risk aversion remained the main driver during the New York session, benefitting the greenback.

The DXY index is up for the third straight day, trading at 107.80, 0.8% higher on the day. Meanwhile, U.S. bond yields advanced across the curve, further fueling the dollar’s advance.
   EUR/USD daily chart.

Despite the recent downward correction, the EUR/USD pair’s short-term outlook remains positive according to indicators on the daily chart. The RSI points lower after being rejected from the overbought area, while the MACD printed a lower green bar, signaling the loss of upward momentum.

The following support levels are seen at the 1.0200 level, followed by the 1.0160 zone, November 11 lows, and the 20-day SMA, currently at around 1.0108. On the other hand, resistance levels could be faced at the 1.0300 level, followed by the more critical 200-day SMA at 1.0408 and the 1.0500 psychological level.

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