EUR / USD technical analysis: failure of the upward correction
Attempts to bounce back by EUR / USD, which hit the resistance level of 1.1667, quickly evaporated and came back to stabilize below the 1.1600 support. This move comes as the euro loses the momentum needed to continue the correction. In the United States of America, the factors that affect the gains made by the most popular currency pair in the Forex market will remain.
The euro has benefited from a favorable global market environment and the dollar has weakened in recent weeks, although domestic factors could weigh on the EUR / USD in the coming days as policy risks the Fed will start to emerge during the first week of next year. month. The ECB’s policy decision at 12:45 p.m. next Thursday and the 1:30 p.m. press conference with Governor Christine Lagarde have grown in importance since the September announcement, as bond markets have sold off sharply. This has dramatically increased government borrowing costs around the world in recent weeks, with investors increasingly betting that a prolonged period of high inflation will push many central banks, including the European Central Bank, to start rising. interest rates next year.
The problem for the ECB, says Marco Valli, chief European economist at UniCredit, is that a rate hike within a year does not appear to be consistent with the central bank’s vision on inflation and guidance on inflation. interest rate.
While inflation has accelerated sharply in recent months and is expected to remain high in the euro area and elsewhere for the next few months, the European Central Bank’s policy directive rules out any changes in interest rates until the bank is forecasting inflation at its identical target of 2%.
The press conference will be a good opportunity for Lagarde to point out that pricing the high probability of a rate hike by the end of 2022 is not in line with the central bank’s interest rate guidelines. Vale added that the European Central Bank was still on track to end its environmental protection program in March.
After nearly a decade of very low inflationary pressures in Europe, the European Central Bank may be one of the central banks least likely to realize that a rate hike may be needed anytime soon, certainly in the second half. 2022, as recent guidance from Frankfurt has made it clear that it will likely resist any “unwarranted tightening” in financial conditions such as those caused by rising bond yields.
The current political stance of the European Central Bank and its historic fight against inflation may mean that you are very likely to face market reactions to interest rates on Thursday, which means this week’s decision could present a risk to the price of the euro. / USD.
Technical analysis of the pair
On the daily chart, if EUR / USD breaks back below 1.1600 support, the currency pair will move back to close to its bearish channel, and bears could then move to the next support levels at 1.1560 and 1.1480. The 1.1480 level would attract buyers as it pushes technical indicators to strong oversold levels. On the upside, psychological resistance at 1.2000 will remain crucial for a general uptrend. But to reach it, the price must first break through the resistance levels 1.1680 and 1.1775.
So far, the general trend of EUR / USD is still bearish and the currency pair will be affected by the release of US economic data, US consumer confidence and US new home sales.