EUR/USD has been bearish since June, having lost around 10 cents as the USD dollar turned bullish, after the FED started to accept that inflation was getting out of hand. In recent months, we have heard some hawkish comments from ECB (European Central Bank) who seem worried about inflation.
Although CPI (consumer price index) is lower in Europe and the ECB hasn’t set anything to start tightening the monetary policy. The FED on the other hand has started reducing the monthly bond purchases and is picking up the speed of tapering, while analysts have predicted three rate hikes in 2022.
So, the FED is way ahead of the ECB regarding the tightening of the policy, which justifies the bearish trend during H2 of 2021. In December we saw this pair consolidate, but now the 50 daily SMA (yellow) has caught up with the price, which has been providing resistance before and is rejecting EUR/USD again now. So, chances are that EUR/USD resumes the bearish trend again early this year and starts pushing toward 1.10 and lower.
The US ADP employment report for December showed an impressive jump, so the US economy is doing well, while European services reports released earlier today showed a cool off in December, with GErman services remaining in contraction.
Friday is the non-farm payrolls report and his will bump up market expectations, even if ADP’s track record since the pandemic has been spotty. It’s the best reading since May. It’s not a surprise to see hiring in transportation and health, which are in high demand; but the jump in leisure and hospitality during omicron was unexpected.