Thursday, November 29, 2018

EUR/USD - 29 November 2018


Fundamental Highlights

The Euro recovers as the Single currency benefits from the sharp drop in the US Dollar. Yesterday, the greenback was heavily sold during Fed Powell’s speech in New York after he surprisingly suggested that interest rates are “just below” the neutral rate, which is unexpected given that earlier this month he mentioned that rates are a “long way” from neutral. Powell’s shift in rhetoric and indirectly hinting of a possible amendment in the Fed’s aggressive rate hiking plan will keep resonating in investors’ minds up until the next Fed meeting, meaning that the US Dollar may continue on its current new path, supporting the Euro higher.

However, investors need to be aware that the Euro is facing its own domestic troubles which might diminish the rise in the currency’s value or even have a negative effect on the currency that would outweigh the benefits of a weaker US Dollar. The major troubles within the Euro area are: the continued dispute between the EU and the Italian government in regards to Italy’s controversial budget plan, the series of negative domestic economic data, a potential shift in the ECB’s rate hike plan (a delay in the next rate hike), and finally the uncertainty associated with Brexit that may spill into the Eurozone. For today, investors will mainly continue to digest Fed Powell’s earlier remarks but they will also remain on the look out for any updates related to the above mentioned domestic troubles within the EU.

Technical Analysis

The Euro breaks above the 13 and 50-period moving averages indicating a possible shift in the momentum of the pair. However, the pair has reached a key resistance level at 1.1400 and a further move up will only be confirmed if prices manage to break the upper end of the resistance level at 1.1433. Note that the break above the current resistance level will coincide with a break above the 200-period moving average which will also confirm the shift in the bias of the pair. Furthermore, the break above the 1.1433 mark will pave the way for a rise towards the next significant resistance level at 1.1490. Finally, a failure to break above the current resistance level will indicate bullish weakness and lead to a drop back towards the 1.1315 support level.

Support: 1.1315 / 1.1260
Resistance: 1.1433 / 1.1490

Chart (H4)