EUR/USD Mid-Session Technical Analysis for January 4, 2022

The Euro is hovering near a two-week low against the U.S. Dollar on Tuesday, lifted by a jump in Treasury yields as traders bet on an early Federal Reserve interest rate hike despite surging COVID-19 cases.

The single-currency fell against the greenback as long-term Treasury yields leapt 12.5 basis points overnight to touch 1.6420% for the first time since November 24.

Money markets have fully priced in a first U.S. rate increase by May, and two more by the end of 2022.

At 12:47 GMT, the EUR/USD is trading 1.1275, down 0.0023 or -0.20%. On Monday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $104.99, down $0.77 or -0.73%.

U.S. Treasury yields climbed on Tuesday morning, ahead of the release of November’s job openings report. A better-than-expected report will indicate a strengthening labor market that will encourage the Fed to lift rates sooner-than-expected.

The JOLTS Job Openings report is expected to show a rise from 11.03 million to 11.06 million. The ISM Manufacturing PMI report is expected to come in at 60.0, slightly below the previous 61.1 reading. The small drop will reflect the impact of Omicron on the services industry.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down when sellers took out 1.1274 earlier in the session. A move through 1.1386 will change the main trend to up.

The EUR/USD is currently trading on the weak side of a long-term Fibonacci level at 1.1291, making it resistance.

The next downside target is a short-term Fibonacci level at 1.1262.

Daily Swing Chart Technical Forecast

The direction of the EUR/USD on Tuesday is likely to be determined by trader reaction to 1.1291.

Bearish Scenario

A sustained move under 1.1291 will indicate the presence of sellers. This could trigger a break into the short-term Fib level at 1.1262.

Taking out 1.1262 will indicate the selling is getting stronger. This could extend the selling into a pair of main bottoms at 1.1235 and 1.1222.

If the downside momentum continues then look for an eventual break into the June 19, 2020 main bottom at 1.1168.

Bullish Scenario

A sustained move over 1.1291 will signal the presence of buyers. The first upside target is 1.1329, followed by 1.1386.