FX.co ★ EUR/USD: Revaluation of Omicron will revive the plan for the fall of the euro

Volatility has increased in the currency markets in the last days of the year. Thin trading conditions continue to increase the risks of sudden uncontrolled movements, so traders will closely monitor technical levels.

The EUR/USD pair hinted at bullish momentum, but it was lost after the monthly maximum tested the day before in the area of 1.1370. Buyers have no facts, looking at which you can confidently push the euro up. On the contrary, both pictures, both fundamental and technical, speak in favor of a further decline in the single currency. First of all, these are different monetary plans of the Fed and the ECB.

The day before, a member of the ECB's Governing Council suggested that inflation in the eurozone would remain above the target level in the new year, while another representative of the regulator hastened to assure that the Central Bank would not reduce incentives and prepare for a rate hike. Christine Lagarde made it clear at the December meeting that there was no need to increase the rate. First, the Central Bank will curtail the program and only then will think about whether there is a need to raise rates. Both the previously outlined prospects and the new comments of ECB members restrain and will restrain attempts to strengthen the euro.

While the EUR/USD pair is trading below 1.1400, the risks of entering a downward trajectory are very high, analysts say. The road to the top is closed, all attempts to break through above will be immediately stopped.

Earlier, there were suggestions that the growth of the euro was fueled by optimistic sentiment in the markets, which in turn were supported by positive news about Omicron. Now there is a different reaction: a surge in the number of infected causes alertness and the veil of Omicron optimism gradually subsides.

The data of the last two days showed that the new strain is not so harmless and may well force countries to introduce lockdowns, although many are now opposed. In France, Italy, the USA, there is a huge surge in the number of infected. Investors may not have suspected that the number of infected people would turn into the so-called quality, but this is already happening. Moreover, now is only the beginning of a new wave that is gaining momentum.

If you look at the indicators for the total number of hospitalized, weekly hospitalizations, and weekly cases of admission to intensive care wards, you can see that the situation is rapidly deteriorating.

The introduction of quarantine will be inevitable when the number of hospitalized people approaches critical levels. The situation in France, Italy, Spain, and the USA is the worst right now. Moreover, in the States, the workload of hospitals is approaching the levels of the summer wave. In such circumstances, it would be logical to expect a decrease in risk appetite in the markets in the coming days. At the very beginning of the year, a revaluation may take place, and not for the better for the same euro, which is already under strong pressure.

Significant support is marked at 1.1300. If the closing price is below this level, the probability of further drawdown in the area of 1.1270 will increase. The resistance is located at 1.1340 and 1.1360. On the eve of the euro, it was possible to look beyond its limits, although not for long. This underscores the importance of this resistance.