CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

EUR USD Poised for a retreat

Article By: ,  Financial Analyst
December 15, 2015 5:52 PM

EUR/USD began to retreat on Tuesday after rising earlier towards major resistance around both its 200-day moving average and the key 1.1100 level. This retreat occurred after annualized US inflation data for November in the form of the Core CPI was reported to have risen a full 2.0% during the 12 months from November 2014. This data potentially provides further rationale for a Fed rate hike on Wednesday, boosting the US dollar and pressuring the EUR/USD currency pair.

After early December’s ECB-driven surge from key support around the 1.0500 level up above 1.0800, EUR/USD has been in somewhat of a consolidation that has gradually drifted higher towards the noted 1.1100 resistance level.

The ECB’s milder-than-expected action to stimulate the European economy during its last meeting in early December prompted a short squeeze for the heavily-sold euro. At the same time, a recent pullback for the heavily-bought US dollar ahead of this week’s Fed rate decision contributed further to the EUR/USD rise.

Despite this rise, however, the fact remains that the ECB and Fed are clearly on divergent paths when it comes to current monetary policy, and should continue to remain as such for the foreseeable future, unless some substantial fundamental change occurs in either or both economies. This places the broad directional bias for EUR/USD generally to the downside, at least from a longer-term perspective. This should especially be the case if the Fed raises interest rates on Wednesday, as expected, and leans more towards the hawkish side in providing some indication of further potential monetary tightening going forward.

 

From a technical view, as noted, EUR/USD has risen up recently to begin approaching major resistance around both the key 1.1100 level as well as the 200-day moving average. This moving average has been closely shadowing the 1.1100 level for the past three months, essentially acting as both support and resistance for the currency pair.

In the event that Wednesday’s potentially market-moving rate announcement from the Fed fulfills broad-based rate hike expectations, the US dollar should continue to find support against the euro, and EUR/USD should likely maintain its place below 1.1100 resistance. If this is to be the case, downside targets on a continued bearish trend remain at the major 1.0800 and then 1.0500 support objectives, with a longer-term target at parity (1.0000).

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024