The Euro ended the last week on a strong note by pushing higher all the way towards the 1.1400 resistance level. The rise in the Single currency was attributed to the weakening US Dollar as a major Federal Reserve official gave remarks that sounded less hawkish than usual. Newly appointed Fed Vice Chair, Richard Clarida stated in an interview with CNBC that “interest rates in the US are nearing the Fed’s estimates of a neutral rate, and a neutral state would make sense for the economy”. What triggered the sell-off in the US Dollar is Clarida mentioning that a neutral policy rate state is between 2.5% and 3.5%. This statement gave the market an idea that we will not see more than three rate hikes next year given that we are already at 2.25% now and the Fed will raise rates to 2.5% in December. Adding to that, Clarida mentioned that there is some evidence of a slowdown in global growth and the Fed is concerned that this will spill into the US.
For today, traders need to keep an eye on the movement of US Treasury yields as it will give them an idea about how the market feels about the future path of interest rates. Away from US fundamentals, Single currency traders need to keep a look out for any major news related to Italy’s budget plan and Brexit.
If the greenback continues to weaken, the Euro will proceed with its upward trend. The next leg up towards 1.1470 will be confirmed if prices broke above the 1.1430 point which coincides with a key price action resistance level and the 200-period moving average. The break above the 200-period moving average is important given that this moving average is a key determinant of the trend bias of the pair.
Support: 1.1400 / 1.1331
Resistance: 1.1430 / 1.1470