ECB’s Lagarde in EUR trader's focus

EUR traders are expected to keep a close eye on ECB President Christine Lagarde’s speech later today. It’s characteristic that the ECB President in recent statements reiterated the narrative of a temporary nature of inflationary pressures as she stated that inflation in the Eurozone will decrease gradually over 2022, a statement which may imply that it may be less imperative for the ECB to actually tighten its monetary policy.

Should the ECB President actually maintain a dovish tone, we may see the EUR retreating as the interest rate differential outlook which could be tilting in favour of the Fed as well as the BoE, instead of the ECB, will be underscored once again.

Later on, we note the release of Eurozone’s preliminary consumer confidence for January which could generate some interest among EUR traders. In EUR’s fundamentals we note the crisis in the Ukraine, as a possible escalation of the tensions in the area could increase the price of Natural gas, which in turn could slow down the economic recovery of the area, thus could weigh on the common currency.

EUR/USD retreated further yesterday, testing the 1.1300 (S1) support line. We tend to maintain a bearish outlook for the pair’s direction, as long as it remains below the downward trendline incepted since the 14^th of the month. Please note that the RSI indicator below our 4-hour chart is between the reading of 50 and 30, implying a bearish sentiment for the pair. Should the bears actually maintain control over the pair, we may see it breaking the 1.1300 (S1) support line and aim for the 1.1235 (S2) support level.

On the other hand, should the bulls say enough is enough and take over, we may see the pair breaking the prementioned downward trendline, 1.1370 (R1) resistance line and aim for the 1.1435 (R2) resistance level.

Canada’s retail sales and oil prices to move the CAD

The CAD, shows some signs of strengthening against the USD, yet is still not so convincing. The possibility of oil prices rising further could continue to provide support for the Looney as Canada is considered a major oil producing country, yet we must note that oil prices are correcting lower for a second day yesterday and were still dropping during today’s Asian session. Inflationary pressures in the Canadian economy seem to have remained strong for December both on a headline as well as at a core level, where the metrics reached an over thirty year high and tended to support the Looney.

Today we note the release of Canada’s retail sales for November and the growth rate is expected to slow down and if so, could weaken the CAD as it would imply that the average Canadian consumer is less willing and/or able to spend in the Canadian economy. USD/CAD edged lower yesterday yet corrected higher during today’s Asian session, floating above the 1.2495 (S1) support line. Despite the pair’s price action printing lower lows and lower highs since the 14^th of the month we maintain our doubts. In order to adopt a bearish outlook we would require the pair to print lower lows and highs below the 1.2495 (S1) line, otherwise we tend to maintain our bias for a sideways movement of the pair.

Please note that the RSI indicator below our 4-hour chart is at the reading of 50 implying a rather indecisive market. Should a selling interest actually be displayed, we may see the pair breaking clearly the 1.2495 (S1) line and take aim of the 1.2410 (S2) level. Should the pair find fresh buying orders along its path we may see the pair aiming if not breaking the 1.2585 (R1) resistance line in search of higher grounds.

Other highlights for today and early tomorrow

Besides the retail sales growth rates of the UK and Canada as well as Eurozone’s consumer confidence, we would also like to note the release of Australia’s preliminary PMI figures for January as well as Japan’s preliminary Jibun Bank manufacturing PMI figure for January as well, both due out during tomorrow’s Asian session. Also, on the monetary front we would like to note the scheduled statements of BoE MPC member Catherine L. Mann in European session.

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