EUR/USD bears moving in as USD firms

• EUR/USD under pressure as the US dollar picks- up in Asia.
• The bears are taking control as forex volatility start to pick up again. 

EUR/USD is back under pressure in Asia following a strong daily's performance with respect to its come back following Federal Reserve's chair, Jerome Powell, hawkish testimony to the US Senate. At the time of writing, EUR/USD is trading at 1.1321 and has dropped from a high of 1.1342 to a low of 1.1318 so far. 

The US dollar was mixed on the day, with defensive currencies outperforming and risk-sensitive currencies underperforming. EUR/USD initially rose from below 1.1300 to 1.1383 before falling sharply to 1.1236 on Powell’s comments, then grinding back to 1.1330. 

This morning Powell conceded inflation can no longer be considered “transitory”, as the risks of persistently higher inflation have grown. Despite the market uncertainty caused by Omicron, Powell indicated it may be time to further curb the rate of bond purchases.

''While this form of monetary policy tightening has been announced before,'' analysts at Westpac said, ''Powell now says the bond purchase program may need to end sooner than previously signalled.''

''He stated that the economy is very strong and inflationary pressures are strong, so it is appropriate to consider wrapping up the taper of asset purchases a few months early, and that this will be discussed at the next Fed meeting. This indicates the bond purchase program may be wrapped up by March 2022 with the final purchases occurring in February.''

Eurozone data was solid

However, data was good to the euro on the day. Inflation in Europe hit a record in November with the headline inflation up 4.9% YoY and core inflation up 2.6% YoY. ''At this point, the ECB continue to insist the current high rate of inflation will not persist,'' analysts at ANZ Bank explained. 

Meanwhile, Unemployment fell in Germany by 0.1% to 5.3% in November as claims decreased by 34k. ''This data was slightly better than expected but Germany’s labour market still has some way to go to fully recover,'' the analysts at ANZ Bank explained.