VOT Research Desk
At the start of the week, there was growing anticipation that the US Federal Reserve (Fed) will change its monetary policy in response to signals of declining inflation in the country.
Throughout the week, the positive vibe began to wane due to indications that global inflationary pressures were still high, rising hostilities between Russia and Western countries, and worries about potential supply-chain problems after the current ones appeared to have been handled.
The Euro, which had earlier profited from the US Dollar’s general weakness, started to give up some of its gains. This past week, the Federal Reserve added to the pressure on high-yielding assets.
As progress in reducing inflation has not been adequate, an increasing number of Fed officials warned the central bank may need to retain its strong stance for some time.
In order to take some action before the winter holidays, the US Federal Reserve will make its decision public on December 14 and the European Central Bank on December 15.
Before the announcements, speculative investors will probably rush to price in any single remark, especially if it differs from the notion of a Fed pivot or a conservative ECB.
EUR/USD Technical Analysis
Although the long-term bullish power of the EURUSD pair has diminished, nothing has been done. The weekly chart reveals that EURUSD posted a higher high while maintaining its position at the top of the previous week’s range.
The 61.8% retracement of the November rise at almost parity is a crucial Fibonacci level, and the 20 Simple Moving Average (SMA) is currently flat at around 1.0030.
It’s not a favourable indication for bulls of the euro when the 100 SMA crosses below the 200 SMA and both begin to develop bearish momentum over the present level.
Last but not least, technical indicators have been flat just above their midlines, reducing the likelihood of higher highs in the coming days.
Since June 2021, the EURUSD has been trading below the moving average; therefore, this trend signal will be crucial since buyers will applaud a bullish breakout of the dynamic resistance level.
As the Relative Strength Index (RSI) consolidates near 67 and the Momentum indicator maintains its bullish slope despite being in overbought territory, the same chart tilts the risk to the upside.
After passing above the 100 SMA and convergent with the aforementioned Fibonacci support level, the 20 SMA likewise turns decisively north.
Providing resistance before the peak at 1.0480 is the daily 200 SMA, which is currently at 1.0416. A continuation past the latter ought to encourage a test of the 1.0600 price region. The first support level is the 23.6% Fibonacci retracement at 1.0305. followed by 1.0190, the 38.2% retracement of the same rise, from the November rally.
