The euro is stable during the London session

EURUSD chart analysis

Recent data on inflation have shown surprisingly growing trends like inflation, and the level of uncertainty surrounding inflation is also very high due to geopolitical risks. Pablo Hernandez de Kos, a member of the Governing Council of the European Central Bank (ECB) and the head of Spain’s central bank, said this morning that the risks of inflation are still looking upwards in the short term. Now it is necessary to keep all the options of monetary policy open. For now, we are sticking to the order starting with the first narrowing, reducing the purchase of government bonds.

“The ECB’s Lagarde’s comments to the European Parliament emphasize the ‘gradualness’ in adjusting policy and the order in which asset purchases are reduced first. This can be considered some evidence from Lagarde and can be seen as sufficient for the hawk market.”

Bullish scenario:

• After touching the 1.14850 level on the chart on Friday, the pair is in a minor pull.
• The 1.14000 level is our current support, and now we need a new positive consolidation to try to test last week’s high again.
• Zone 1.14850-1.15250 is critical to us on the chart, and we need a break above to continue.
• After that, our next resistance is at 1.16000 from November last year.
• If EURUSD continues with the bullish momentum, the next potential resistance awaits us at 1.17000, October high.

Bearish scenario:

• We need continued negative consolidation and further withdrawal of EURUSD to the first lower support.
• Our first support is in the zone around 1.13500. where moving averages MA20, MA50 and MA200 await us.
• Break below, lead us further to the place of the beginning of the previous impulse at 1.12650.
• If bearish pressure continues, it is very likely that we will go down to the previous low of 1.11200 from January.

Market overview

Italian economic news

Italian retail sales rose strongly in December in the last three months, after falling in the previous month, preliminary data from the statistical institute ISTAT showed on Tuesday. Retail sales rose 0.9 percent from November when they fell 0.4 percent. Food sales rose 1.7 percent and non-food sales 0.1 percent.

Year on year, the retail value rose 9.4 percent in December after increasing 12.4 percent in November. Sales grew annually for the tenth month in a row.

Internet sales fell 4.1 percent year-on-year in December, the second drop in 2021. In addition, online sales levels in December were still significantly higher than in February 2020, before the pandemic, ISTAT said.

For the whole of 2021, the retail value and sales volume increased by 7.9 percent and 7.2 percent, respectively.

ECB news

Bond yields have risen, and the euro recorded its best weekly performance since March 2020 last week after the ECB opened the door to increasing interest rates later in 2022 and said the March 10 meeting would be key to deciding how quickly the central bank withdraws its long-standing bond-buying scheme.

The ECB’s hawkish turn surprised markets and boosted yields on peripheral debt, especially in Italy, on Monday, as investors worried about the impact of a faster-than-expected monetary tightening on the bonds of the most indebted countries. “After all, investors are well aware that, when the ECB’s ‘shock’ is absorbed, reference rates will rise much more in the coming months in the United States than in the eurozone,” said Unicredit Bank’s strategists.