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The Euro Retreats from Local Highs

12/7/2022 10:40 AM

The European currency shows mixed dynamics, developing a corrective impetus formed at the beginning of this week, when the instrument was trading near its local highs of June 28. The EUR/USD pair is testing 1.0460 for a breakdown, retreating under increasing pressure from the US currency. The latter is supported by some doubts about the upcoming slowdown in monetary policy tightening by the US Federal Reserve.

The last meeting of the regulator this year will take place next week, and at the moment, analysts expect an interest rate hike of only 50 basis points. However, the released macroeconomic statistics, including the November report on the US labor market, indicates that the recession in the national economy may come later than previously estimated, and therefore the agency may bet on a more aggressive fight against the still high consumer inflation.

Yesterday, the euro was supported by data from Germany. Industrial Orders in October showed an increase of 0.8% after declining by 4.0% in September, while analysts expected a negative trend of -0.2%. In annual terms, the decline in the indicator slowed down from -10.8% to -3.2%, which also turned out to be significantly better than forecasts at the level of -7.5%. The focus of investors today will be statistics on the dynamics of the Gross Domestic Product (GDP) of the eurozone for the third quarter. The revised estimate does not imply any change from previous data (0.2% QoQ and 2.1% YoY).

Meanwhile, European Central Bank (ECB) Chief Economist Philip Lane said eurozone inflation is close to peaking but could pick up early next year. He noted that the regulator has already done a lot of work to contain the pace of growth in consumer prices, but the increase in interest rates should be continued, even taking into account that since July the rate has already been adjusted by 200 basis points. The official also predicted a major slowdown in inflation in the spring or early summer, stressing that it would take time to hit the 2.0% target.

Bollinger Bands in D1 chart show moderate growth. The price range expands, freeing a path to new local highs for the "bulls". MACD is falling, keeping a relatively strong sell signal (the histogram is below the signal line). Stochastic is showing similar dynamics being located in the middle of its area.

Resistance levels: 1.0500, 1.0550, 1.0600, 1.0640. | Support levels: 1.0450, 1.0400, 1.0350, 1.0300.

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