EUR/USD: 1.1220 opens risk to 1.1000, FOMC eyed

• EUR/USD bears get set for a run on the 1.1000 figure for the sessions ahead. 
• Bears need to break the hourly support seen in recent lows near 1.1220. 

EUR/USD is slightly up at the moment by some 0.14% after travelling from a low of 1.1226 and reaching as high as 1.1275. Nevertheless, not much more can be expected on a day where markets are subdued ahead of the Thanksgiving Day holiday Thursday in the US and key data tomorrow. 

Overall, the focus is on the greenback. The dollar index, DXY, has held near 16-month highs that were made when Federal Reserve Chair Jerome Powell was picked for a second term. This disappointed the bears who had been placing bets on a more dovish outcome in Lael Brainard. Instead, The Powell-pick has reinforced market expectations that lift-off will happen in 2022.

'We are not expecting the data to suddenly weaken significantly in the next two months, so pressure on Fed officials to at least sound/look a bit more hawkish could only increase in the near term, including in confirmation hearings and in the December dot plot,'' analysts at TD Securities argued. 

''We think the USD can remain firm against the funders as the prospect of a faster taper remains a risk the market is chewing on,'' analysts at TD Securities added.  

All eyes on FOMC minutes

Currency markets have been mostly driven in recent months by market perceptions of the different paces at which global central banks reduce pandemic-era stimulus and raise rates. In that regard, Wednesday's FOMC minutes of the 2-3rd November will be key because Fed officials have seemed to be increasingly open to discussing a faster pace of policy normalisation of late. The minutes of the meeting could shed some light there. If the bar is seen lower for accelerating tapering and/or bringing forward rate liftoff then this could well fuel another strong rally in the greenback. 

EZ data looking better

Meanwhile, the euro bounced off of 16-month lows on Tuesday, helped by better-than-expected business growth in the region. The preliminary read was better than expected, rising to 55.8 as services lifted 2 points to 56.6 (54.6). Manufacturing also edged higher to 58.6. ''November’s buoyancy, however, is facing headwinds from the recent COVID surge,'' analysts at ANZ Bank explained. ''Input and output prices both rose – price pressures are intensifying further in the euro area.''

However, the euro is going to be vulnerable as concerns grow over new COVID-19 restrictions in Europe, with Austria entering another full lockdown and Germany considering following suit. Germany's health minister has called for further restrictions on public spaces.

EUR/USD technical analysis

EUR/USD is resting at short-term technical support in the 1.1220/30 area. Commerzbank technical analysts Karen Jones and Axel Rudolph said in a report on Tuesday. that, ''if it breaks below this area, however, it would likely fall to $1.1000, which is the 78.6% retracement of 2020’s move,'' a follows ...

EUR/USD H1 chart