The Euro is still trading in a downtrend and the pair has reached an important support level of 1.2300. If this level is soon broken down, the decline may reach the level of 1.2200. The single European currency is affected by macroeconomic data, for example, the Composite Purchasing Managers Index dropped to 51,1 points in November. According to some preliminary economic forecasts, a decreasing demand on the part of Russia and China may result in recession and production cut in Europe.
Another factor affecting the Euro rate is the slowing inflation rate. The eurozone’s Consumer price index equalled as little as 0,3% in November. As a result, the European Central Bank decided to relaunch economy through lending to the real sector, so an increase in interest rates should not be expected in the nearest future.
On the contrary, the US economy is reaching the pre-crisis level, which makes a dollar into an attractive investment tool. Falling energy prices are also allowing the dollar to gain strength.
The ECB's interest rates will be published tomorrow, but the surge of trading volatility is not implied in the absence of any changes. At the same time, US initial jobless claims may consolidate considerably the dollar if the positive outlook is confirmed.
Support and resistance
The nearest resistance level is 1.2329 (0/8 Murray). The nearest support level is 1.2299 (1/8 Murray).
Go short after the level of 1.2990 is broken and place protective orders near the level of 1.2325 with the target at 1.2250.Publication source