EUR plunges to new cycle lows, 1.13 eyed
<p><strong>Overnight Headlines</strong></p>
<p>*USD hit a fresh 16-month high driven by EUR weakness</p>
<p>*US stocks close little changed</p>
<p>*Biden tells Xi US doesn’t support Taiwan independence</p>
<p>*UK unemployment 4.3% vs 4.4% expected, prior 4.5%</p>
<p><strong>USD</strong> took another leg higher, mainly due to EUR weakness. The single currency made fresh lows at 1.1363, a level not seen since July 2020. GBP was net unchanged closing on the September low at 1.3411. USD/JPY rose to 114.15 and looks poised to push towards recent highs at 114.69.</p>
<p><strong>US equities</strong> had a quiet start to the week. Bond yields rose and there was a slight preference for defensive sectors. Asian shares are mostly higher. The Biden-Xi meeting is being viewed positively. There is also some relief in the Chinese property sector which is supporting sentiment. European and US futures are modestly in the green. </p>
<p><strong>Market Thoughts – EUR drops sharply</strong></p>
<p>The euro tumbled as ECB President Lagarde doused rate hike talk. She declared that the conditions for a rate rise were very unlikely to be met in 2022. She added that growth momentum was moderating and there was no evidence that higher inflation is feeding into wage growth.</p>
<p>EUR was hammered and the weakest major on the day. The DXY bull trend remains fully intact. Next target for bulls and resistance is 95.71. Next support in EUR/USD support comes in around 1.13. EUR/CAD dropped to levels last seen in April 2017.</p>
<p><strong>Chart of the Day – EUR/CHF drops to new lows</strong></p>
<p>This pair has been in bearish consolidation mode recently around 1.0550. With little signs of SNB intervention, downside pressure told yesterday and prices made new cycle lows. We are now in a ninth straight week of losses.</p>
<p>The long-term bottom from May last year sits at 1.0503. This is major support from the downtrend started in April 2018. Resistance above 1.06 needs to be breached to slow the bears.</p>
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