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EURUSD retraces to trendline from 1.1483 top

The EURUSD pair traded lower on Thursday, January 20, down by 0.27% to 1.1312. The main reason for the decline from 1.1358 to 1.1303 was a sell-off in US equities and a downturn in stock indices.

Investors have been selling USTs in anticipation of higher interest rates. This boosts bond yields and puts pressure on tech stocks. The Nasdaq Composite on Thursday fell 1.3% to 14,154.02, the DJIA slid 0.89% to 34,715.39, and the S&P 500 closed 1.44% lower at 4,482.73.

Today’s macro agenda (GMT 3)

  • 16:00 UK: BoE MPC member Catherine Mann speech
  • 16:30 Canada: retail sales (November)
  • 18:00 Eurozone: consumer confidence (January)
  • 18:00 US: CB leading index (December)
  • 21:00 US: Baker Hughes weekly oil rig count

Current outlook

By the time of writing, major currencies showed mixed dynamics. The Australian dollar (-0.38%) and the New Zealand dollar (-0.37%) have seen the steepest losses. Falling stock indices exert an adverse impact on risk-sensitive assets. The CBOE Volatility Index (VIX) reached 25.59. The critical level is 30, after which panic selling of shares sets in. If market participants start to buy back into falling equities, the odds of major currencies avoiding sharp pullbacks will increase.

Price action found support at 1.3010, rebounding to the 55-day SMA (balance line) and is trading near the trendline from 1.1483. Morning gains were underpinned by euro cross pairs, which are on the rise after yesterday's downturn. Meanwhile, the prospects of Fed rate hikes amid jittery sentiment on US markets are having a negative impact on risk assets.

Price action is still stuck within the December range of 1.1225-1.1386. At this point, it looks as though uncertainty will persist until January 26, when Fed chair Powell speaks.

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