Solid News

EURUSD Market Update

12/1/2022 1:58 PM

This week, the EUR/USD pair continues to attempt growth and is currently trading around 1.0460.

Pressure on the US currency is still exerted by the expectation of a decrease in the growth rate of the US Fed interest rate at the December meeting. Earlier, this possibility was confirmed by the head of the regulator Jerome Powell, who said that "slowing down at this point is a good way to balance the risks." Nevertheless, the official noted that there is still a lot of work to be done to achieve price stability. Powell's comments convinced most experts that in the current month the value will be adjusted by only 50.0 basis percentage points, and not by 75.0, as it was earlier. Additional pressure on the dollar was exerted by the release of weak statistics on the US labor market, which illustrated the slowdown in the US economy caused by a sharp tightening of monetary policy. Thus, the November indicator outside the agricultural sector from Automatic Data Processing (ADP) was only 127.0K, which is lower than both the forecast of 200.0K and the October value of 239.0K, and the number of vacancies in the JOLTS labor market in October decreased from 10.687M to 10.334M.

Under these conditions, the euro becomes more attractive to investors, but its strengthening may be limited due to the uncertainty of further actions of the European Central Bank (ECB). The fact is that officials led by Christine Lagarde have recently stated that they do not see signs of a weakening of inflationary pressure in the eurozone, and it has not yet reached its peak. Nevertheless, the November inflation data released the day before recorded positive dynamics: on a monthly basis, the consumer price index decreased from 1.5% to -0.1%, and on an annual basis – from 10.6% to 10.0%. This statistic caused investors to hope that the European regulator, like the American one, will also slow down the pace of interest rate increases. If the ECB refuses to sharply tighten monetary policy, the euro's positions may come under new pressure.    

Technically, the price is close to 1.0500 (Murray [6/8]), which is seen as key for the "bulls", its breakout will give the prospect of further growth to the area of 1.0620 (Murray [7/8]) and 1.0742 (Murray [0/8]). In case of a breakdown of the level of 1.0253 (Murray [4/8]), supported by the middle line of the Bollinger Bands, the decline may resume to 1.0009 (Murray [2/8]) and 0.9887 (Murray [1/8]), however, this movement option seems less likely, since technical indicators point out the continuation of the upward trend: the Bollinger Bands are directed upwards, the Stochastic is also reversing upwards, and the MACD histogram is stable in the positive zone.

Resistance levels: 1.0500, 1.0620, 1.0742. | Support levels: 1.0253, 1.0009, 0.9887.

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