EURUSD The euro returns to test key support near $1.12

The EURUSD continued its slide yesterday, falling to its lowest level

since June 2020 at $1.12. The euro has been weighed down in recent days

by the tightening of health restrictions in Europe, which will

inevitably have an impact on the European economy, and strong U.S.

economic data reinforces the outlook for higher rates.

Indeed,

recent U.S. data has been rather better than expected, so much so that

the Citigroup Economic Surprise Index has reached its highest level

since June. In addition, the PCE index, the Fed's preferred inflation

gauge, rose 5% year-over-year in October, and 4.2% excluding food and

energy, the highest inflation in 30 years, and weekly jobless claims

fell to 199,000, the lowest level in 50 years.

These positive

economic surprises and very high inflation are naturally fuelling

investor expectations of a Fed rate hike. The first-rate hike is now

expected in May.

European health developments and upcoming

economic releases will continue to be key for the EURUSD. The weekend is

expected to be relatively quiet as no major releases are expected and

US traders will be away on Thursday for Thanksgiving and will leave for

the weekend early Friday at 18:00 CET.

From a technical

perspective, the EURUSD appears to be in a short-term descending wedge

pattern, indicating bullish pressure that remains minor but is becoming

increasingly important. The daily RSI is showing the same pattern as it

is leveling out with slight positive sloping.

Traders could

therefore be taking advantage of the return of the EURUSD near its June

2020 low at around $1.1168 to lighten their short exposure and/or

increase their bullish bets.

 (Chart Source: Tradingview 25.11.2021)

A

breakout from the top of the Bollinger Bands and a rebound of the RSI

above 50 would be signaled in favor of a retracement of part of the

euro's decline. The first resistance to watch would be at $1.1422.

If the euro continues to fall, the next major support to watch would be at $1.10.

Disclaimer:

This material has been created for information purposes only. All views

expressed in this document are my own and do not necessarily represent

the opinions of any entity.