Could EUR/USD finally break 1.05 on this FOMC day?

15 December, 2016

The market is demanding a rate rise and the Fed better deliver it today, for if it doesn’t the bank’s credibly will be severely damaged. There is really no excuse not to do so. Economic data has been improving, financial markets are calm, and Trump’s planned fiscal spending will likely put upward pressure on inflation – not to mention the impact of rising crude oil prices. The dollar could absolutely tank if the Fed does the unexpected and holds fire. But the dollar may drop anyway if the expected rate rise is accompanied by a more dovish-than-expected policy statement and/or projections. I however think this will not be the case. I think the Fed will deliver an upbeat outlook on the economy and the dollar will surge, especially against weaker currencies like the euro.

For the EUR/USD, a hawkish Fed hike could mean the breakdown of the 1.05 handle at the umpteenth time of asking. The ECB has already decided to extend its QE programme and has therefore turned even more dovish. Thus, the growing divergence of monetary policy stances between the US and Eurozone should keep the pressure on the EUR/USD exchange rate.

Now you have seen this weekly chart of the EUR/USD before. If you haven’t, HERE is the link for our December 2 article in which we pointed out two scenarios. We argued that before the ECB and Fed policy meetings that there was a good possibility the EUR/USD would break above 1.0660 and rally into the 1.0850/80 resistance area, before turning lower. Well it did just that on the ECB day and dropped sharply off of this broken old support area, as one would have expected. The unit then paused again at the top of the key 1.0460/1.0525 support range ahead of the FOMC, and is where it was again at the time of this writing.

So far, the EUR/USD has stuck to the script. But it will need to break this 1.0460/1.0525 support area this week, preferably today, if we are to see a run towards parity soon. If it fails to crack the sturdy support despite the ECB extending QE and Fed potentially hiking rates today, then one would have to conclude that the EUR/USD may have put in a bottom for the time being. But our base case scenario is that we will see a breakdown. If so, the first bearish objective on the weekly time frame will be the Fibonacci convergence area between 1.0175 and 1.0225. Below here, the next objective would be parity. This bearish view will become weak if price holds above 1.0690 on a weekly closing basis and become invalid if 1.0850/80 resistance breaks.

Source link  
Gold surges to major $1250 resistance as uncertainty prevails

Gold surged Thursday on a breakout of its previous consolidation to hit and slightly exceed major technical resistance at $1250, a level not seen since early November...

Gold remains vulnerable amid hawkish Fed, strong dollar, equity highs

Gold has climbed sharply since the beginning of the year as the US dollar has pulled back from its late-2016 highs and the US Federal Reserve has exercised characteristic restraint in raising interest rates further after the last rate hike in December...

Gold well-supported on safe-haven flows, lagging dollar

Increasing political and economic uncertainties under the new Trump Administration, coupled with a sliding US dollar since the beginning of the year, have led to a sharp rise in gold prices for more than a month...

Gold pressured as dollar and equities remain supported

As the US dollar found some new life on Thursday and US equity markets hovered right around their new all-time highs, gold extended its recent pullback well below the $1200 handle. Since late December, the price of gold had been in a sharp relief rally from its 10-month lows around $1125 support...

Crude oil maintains bullish trend

Oil prices were initially weaker at the start of the new week, but they have now recovered to trade almost flat at the time of this writing. At the weekend, the OPEC and some producers outside of the group met to discuss the progress of their oil production deal...

Trump press conference fails to deter equity bulls

President-Elect Donald Trump spoke on Wednesday morning at his first formal press conference since the November elections, and the markets were all ears. Trump covered a lot of ground with multiple topics that included...

Gold ripe for potential relief rally

The charts tell a clear story of the unrelenting plunge in gold prices since early November. This steep dive has been the result of several related factors, all of which have the potential to extend well into the new year. These largely Trump-driven factors include...

Mixed Jobs Report Keeps High Fed Expectations Intact

As we noted the day before Friday’s US jobs report, only a significantly worse-than-expected reading for November would have likely made the Federal Reserve’s next interest rate decision more difficult...

Silver lining for precious metals?

I do apologise in advance for bombarding you with lots of commodity reports, but ahead of Friday’s NFP report, the FX markets tend to create lots of false moves, so it is difficult to make much of todays moves...

In the past 24 hours Bitcoin has lost -0.38% and reached $3626.18939093. Open your trading account with the best cryptocurrency brokers on special terms today.

In the past 7 days the EUR/USD pair has lost -0.5573% and is now at $1.1277. Start trading and making money on Forex today.

In the past 7 days Ethereum has gained 6.91% and is now at $127.442279531. Have the most popular cryptocurrencies compared online 24/7.

Top Brokers offering Forex Market Analysis

Forex Currencies Forecasts

Top 10 Forex Brokers 2019

# Broker Review
5FIBO GroupFIBO Group84%
10FP MarketsFP Markets70%