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Euro Recovers after Decline

11/29/2022 11:03 AM

The European currency is recovering after the ambiguous dynamics on Monday, when quotes showed a confident upward trend in the first half of the day and managed to update local highs from June 29, almost reaching 1.0500. Nevertheless, the "bulls" failed to consolidate on new highs, and by the close of the day session the EUR/USD pair returned to the "red" zone.

The driver of the upward dynamics is still the corrective weakening of the US dollar, which is under pressure after the publication of the minutes of the November meeting of the US Federal Reserve last week. The regulator confirmed its readiness to reduce the pace of interest rate hikes already in December, and at the moment more than 70% of analysts expect that the agency will decide to adjust the value by 50 basis points, after which it may move to a step of 25 basis points in 2023.

In turn, the euro reacted positively to the comments of the President of the European Central Bank (ECB), Christine Lagarde. The day before, the official said that the Bank will continue to raise the interest rate, despite the threat of an economic downturn and a weakening of business activity in the region. As before, the ECB is aiming for a target inflation rate of 2.0%.

Today, investors are evaluating a block of macroeconomic statistics from the eurozone on the level of Consumer Confidence and Economic Sentiment. In the middle of the day there will be data on inflation dynamics in Germany for November. Current forecasts suggest a slowdown in annual Consumer Price Index from 10.4% to 10.3%, while the Harmonized CPI may decrease from 11.6% to 11.3%.

Meanwhile, representatives of European states continue to discuss the maximum level of prices for Russian oil. It is necessary to reach a consensus before December 5, the date when the restrictions provided for by the eighth package of sanctions, which include an embargo on the supply of "black gold" from the Russian Federation by sea to the EU countries, will come into force. The European Commission insists on a peak value of 65.0 dollars per barrel, but Polish diplomats oppose this decision, considering it ineffective, since the limit is close to current quotations. In addition, Poland initiates restrictions on the operation of the Polish-German section of the Druzhba oil pipeline so that official Warsaw can terminate the existing agreements of the Polish oil refiner Orlen on the purchase of Russian oil in 2023 without paying penalties.

On the daily chart, Bollinger Bands show a moderate increase. The price range is narrowing, reflecting the emergence of ambiguous dynamics of trading in the short term. MACD is going down preserving a weak sell signal, located below the signal line. Stochastic, having shown an active downward reversal at the end of last week, still shows a confident downward direction, signaling in favor of the development of "bearish" trend in the near future.

Resistance levels: 1.0400, 1.0450, 1.0500, 1.0550. | Support levels: 1.0350, 1.0300, 1.0253, 1.0200.

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