US dollar eased on risk appetite recovery

Following a broad sell-off Monday amid fears about the Omicron variant, futures rose in early morning trade Tuesday as widespread selling in global shares eased.

As Chinese markets cheer Beijing's support for troubled property firms, Asian shares recovered from Tuesday's rough Wall Street session.

Market appetite for risk assets and currencies improved on Tuesday, causing the Australian dollar- one of the hardest-hit currencies due to its strong correlation to the global economic outlook- to bounce in on Tuesday, snapping a two-day losing streak. On the other side, the dollar softened a bit following a blow to Democratic spending plans in Washington.

After its losses extended overnight, the US dollar index is hovering in a pennant pattern in the 96-corridor.

EUR is consolidating below 1.13

EURUSD is flat so far this Tuesday, stuck in a tight range between 1.1360 and 1.1220 as the markets move into holiday light volume conditions. After falling on the lower edge of its consolidation pattern, the euro is headed toward the upper edge. However, a clear trend will be evident with a decisive break out of the range. A strong break above would fuel the pair to meet the next hurdle at 1.1450, in line with the 50-day exponential moving average.

Should buyers continue to drive the market, then the next resistance will come from 1.1545.

On the flip side, a break below the 1.1220-mark would encourage sellers to drag down the price towards the 1.1140-mark. Should selling pressures intensify, the bears could target the 1.1050-handle.

Events of the day

On the economic calendar, there is a relatively quiet day. Consumer sentiment figures for Germany and the retail sales numbers for CAD will be in focus today. With governments rolling out new restrictions to curb the spread of the Omicron virus, a slide in confidence would test EUR support.