This week's sell-offs have pushed the EUR/USD pair to the support level of 1.2132 before it settled around the 1.2160 level as of this writing. Investors' fears have returned about the increasing numbers of COVID-19 infections and deaths in Europe and the subsequent restrictions and lockdowns.
Spain recorded 38,869 cases of coronavirus and 195 deaths only yesterday. Accordingly, the incidence rate increased for two weeks per 100,000 residents, which doubled over the past month, to 492 cases on Wednesday. The country has recorded a total of 2.17 million cases and more than 52,000 confirmed deaths.
Coronavirus deaths in the US recorded their highest level in one day, with more than 4,300 dead. California has lifted some stay-at-home orders in northern counties, while many are still in effect as coronavirus cases increase.
Japan has expanded the virus emergency to 7 other regions as cases increase.
Data from Eurostat, the European statistics agency, showed that industrial production growth in the Eurozone accelerated unexpectedly in November, driven by strong growth in capital goods production. Accordingly, industrial production increased by 2.5% on a monthly basis, faster than the 2.3% increase in October. It was the fastest growth in four months and far exceeded economists' expectations of 0.2%. Production of capital goods increased by 7%, and production of intermediate goods increased by 1.5%. Meanwhile, energy production decreased by 3.9%. Production of durable and non-durable consumer goods decreased by 1.2% and 1.7%, respectively.
On an annual basis, the decline in industrial production slowed to 0.6% from 3.5% in October. Production was expected to decline by 3.3%.
In the entire European Union, industrial production grew by 2.3% month-on-month in November, but decreased by 0.4% compared to the same period last year. Among the member states, Ireland recorded the largest monthly growth of 52.8%. Meanwhile, the largest decreases were observed in Portugal, Belgium and Croatia.
The US Labor Department released a report showing that US consumer prices rose in line with economists' estimates in December. The report said that the Consumer Price Index rose by 0.4% in December after rising by 0.2% in November. Price growth matched expectations. The Labor Department also said that the CPI progress was driven by a 8.4% jump in gasoline prices, which accounted for more than 60% of the overall increase.
Other components of the Energy Index were mixed, leading to an increase of 4.0% for the month. Excluding food and energy prices, the core CPI rose 0.1% in December after rising 0.2% in November. The sharp increase in base prices also matched economists' estimates. Commenting on the report numbers, Cathy Bostancec, Chief US Financial Economist at Oxford Economics, said: “The benign core inflation readings support our call that the Fed does not raise interest rates from the actual historical minimum until 2024 and begin to reduce quantitative easing until 2023.”
Technical analysis of the pair:
On the four-hour chart, the EUR/USD pair appears to be forming a head-and-shoulders pattern. Sell-offs and bearish performance will increase if the 1.2110 support level is breached, which paves the way for a move towards the psychological support level at 1.2000. The performance will turn bullish if the resistance at 1.2300 is breached again. But I still prefer selling the currency pair from every high, as fears of a continuation of the pandemic despite reaching vaccines still persist.
Today's economic calendar:
The European Central Bank's monetary policy report will be announced. From the United States, we expect the number of weekly unemployment claims, followed by the upcoming statements of Federal Reserve Chair Jerome Powell.
