EUR/USD eases from monthly top towards 1.1300, focus on coronavirus, yields

• EUR/USD refreshes intraday low while consolidating recent gains around multi-day top.
• Firmer yields favored bulls the previous day, challenges to sentiment, year-end inaction probe upside momentum.
• Omicron news, geopolitical headlines weigh on risk appetite amid quiet session.
• US Jobless Claims, Chicago PMI will decorate the calendar.

EUR/USD drops back towards 1.1300, down 0.13% intraday around the daily low near 1.1333 as market sentiment dwindles during early Thursday morning in Europe.

The major currency pair refreshed its monthly top, also posted the biggest daily gains in a week, the previous day after the US Dollar Index (DXY) slump on surprise volatility in the US bond market. Also favoring the EUR/USD prices were downbeat US data and global policymakers’ rejection to considering fears emanating from the South African covid variant, namely Omicron.

However, the recent macros challenge the previously optimistic market mood amid thin end-of-year liquidity conditions and trigger the quote’s consolidation of the latest gains near the multi-day high.

That said, the record covid cases in multiple nations seem to push policymakers towards rethinking over the previous easing of activity restrictions during the holiday period. Recently, Australia Prime Minister (PM) Scott Morrison said, “Omicron indicates that Australia needs to reset its pandemic response.”

Before that, Reuters mentioned, “Almost 900,000 cases were detected on average each day around the world between Dec. 22 and 28, with myriad countries posting new all-time highs in the previous 24 hours, including the United States, Australia, many in Europe and Bolivia.”

It’s worth noting that a jump in the US Treasury yields, which rallied the most in three weeks after the US seven-year Treasury bond auction showed disappointing demand for the government securities, previously weighed on the greenback. On the same line were the US data showing that Pending Home Sales for November dropped below the forecast of +0.5% to -2.2% MoM whereas Good Trade Balance hit a record deficit of $-97.8B versus $-83.2B prior. On the contrary, the German Bund Yields jumped the most in six weeks to a two-month high the previous day amid hopes that the bloc will be able to overcome the pandemic.

Talking about geopolitical risks, Reuters quotes US Secretary of State Antony Blinken said, “The US urges Chinese and Hong Kong authorities to release stand news staff members immediately.” Earlier in the day, Saudi Arabia’s King Salman bin Abdulaziz raised concerns over Iran’s lack of cooperation with the international community on its nuclear program and ballistic missile development.

Against this backdrop, the US 10-year Treasury yields seesaw around 1.55% while the S&P 500 Futures print mild losses near 4,784. Further, Asia-Pacific stocks trade mixed to track their Wall Street counterparts.

Looking forward, EUR/USD traders will need to pay attention to the US Weekly Jobless Claims and Chicago Purchasing Managers’ Index for December, expected 205K and 62 versus 205K and 61.8 respectively, for fresh impulse. Also important will be covid updates and news concerning Iran and China.

Technical analysis

Failures to keep the key trend line breakout directs EUR/USD prices towards the 21-DMA and 23.6% Fibonacci retracement (Fibo.) of October-November downside, close to 1.1300, will challenge the declines. Meanwhile, the 50-DMA and November 16 high near 1.1385-90 becomes the key hurdle to watch.