EUR/USD Opens Risk To 1.1000, FOMC Minutes Eyed

On Tuesday, the EUR/USD pair is slightly up by 0.14% after moving from a 1.1226 low and reaching as high as 1.1275. However, 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 Wednesday.

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

FOMC Minutes Eyed By Investors, Traders and Market Participants
Currency markets have been mostly driven in recent months by market perceptions of the different paces at which global central banks reduce the 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 monetary policy normalization. The minutes of the meeting could shed some light there. If the bar is seen lower for accelerating tapering and bringing forward rate lift-off then this could well fuel another strong USD’s rally.

Better Eurozone Data
The euro bounced off of 16-month lows on Tuesday, meanwhile, 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 rose to 58.6. November’s buoyancy, however, is facing headwinds from the recent COVID-19 surge, so input and output prices both rose while price pressures are intensifying further in the Eurozone.’

The euro is going to be vulnerable as concerns grew over new COVID-19 restrictions in Europe, with Austria entering another full lockdown and Germany considering similar procedures. Germany’s health minister has called for further restrictions on public spaces.

EUR/USD is resting at short-term technical support in the 1.1220/30 area, if it breaks below this area, however, it would likely fall to $1.1000, which is the 78.6% retracement of 2020’s move.