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Euro is Consolidating Near Local Highs

12/2/2022 10:55 AM

The EUR/USD pair shows flat dynamics, consolidating near the local highs of June 28 and the level of 1.0520. The single currency actively added value at the trading on Wednesday and Thursday after the speech of the Chairman of the US Federal Reserve Jerome Powell, who confirmed the readiness of the regulator to reduce the pace of interest rate hikes in December. After four consecutive adjustments by 75 basis points, the Fed is expected to increase the value by only 50 basis points, after which the pace can be reduced to 25 basis points.

Additional pressure on the dollar yesterday was exerted by weak November statistics from the US from the Institute of Supply Management (ISM): the Manufacturing PMI corrected from 50.2 points to 49.0 points, while analysts had expected a decrease to 49.8 points, and the Manufacturing Employment Index decreased from 50.0 points to 48.4 points, which also turned out to be significantly worse than forecasts at the level of 49.3 points.

The euro, in turn, was supported by unexpectedly optimistic inflation data, which helped reduce fears about the depth of the recession in the European economy. The Consumer Price Index in the euro area in annual terms in November retreated from 10.6% to 10.0%, which turned out to be 0.4% lower than analysts' forecasts, and in monthly terms, deflationary phenomena were recorded for the first time in a long time: the CPI decreased by 0.1% after rising by 1.5% in October.

In addition, October statistics on Retail Sales in Germany were published the day before, with their volume decreasing by 2.8% instead of the expected 0.6% on a monthly basis, and by 5.0% instead of 2.8% on an annual basis. Such dynamics were caused by rising prices, which reduced household demand for everything except essential goods. Analysts expect a decline in Christmas sales and a recession in the German economy in the fourth quarter.

Bollinger Bands in D1 chart show moderate growth. The price range is expanding but it fails to conform to the surge of "bullish" sentiments at the moment. MACD indicator is growing, while preserving a rather stable buy signal (located above the signal line). Stochastic retains an uptrend, but is located in close proximity to its highs, which points to the risk of overbought euro in the ultra-short term.

Resistance levels: 1.0550, 1.0600, 1.0640, 1.0700. | Support levels: 1.0500, 1.0450, 1.0400, 1.0350.

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