EURUSD retreated today as it faces strong resistance at the 200-day moving average. Earlier today reported that final inflation figures in the euro area CPI rise 10.6% below the expectations of 10.7% and 5% when it comes to the Core CPI in line with the forecasts.
Economists now re-price the ECB rates expectations as speculation rise that ECB may slow down interest rate hikes with only 50 basis points hike in the December meeting. Analyst’s now expecting a 57 basis points hike in December, down from 77 basis points hike expectations at the end of October. Economists also expect an ECB pivot in 2023.
Rising speculation of a recession in Europe and geopolitical concerns are the main headwinds for the common currency.
Fed’s interest rate policy potential pivot is the key source of the sharp advance in the EURUSD since last November 4. Markets pricing now, a 50 basis points hike in the December 14 FOMC meeting. Meanwhile, Fed’s James Bullard said earlier that the minimum level for a restrictive Fed policy rate would be 5% to 5.25%. The Fed has hiked interest rates from zero in March to a range of 3.75% to 4%.
On the fundamental front, the Philadelphia Fed Manufacturing Index dropped to -19.4 in November well below the expectations of -6.2. Yesterday, the US Retail Sales in October increased by 1.3% above the forecasts of 1% and 0.0% in the previous month, suggesting that we might avoid a hard landing. The US Industrial Production contracted by 0.1% in October better than expectations of 0.2% and 0.1% in the previous month.
EURUSD Technical Analysis
EURUSD failed to break above the 200-Day Moving Average after three attempts in the last trading sessions as the common currency runs out of steam. Consolidation is expected now after the recent rally.
While the euro keeps the positive momentum, strong resistance for the EURUSD pair is expected at 1.0481 the monthly top from November 15. The next hurdle awaits at 1.0540 the high from June 29.
On the other hand, if the correction continues the pair would face support at 1.0285 the low from November 15. Euro could continue to decline if breaks below 1.0285, towards 1.0266 the low from November 11 which would provide solid support. Bears would regain control only if the pair breaks below the 100-day moving average at 1.002.
Nikolas has been involved in the finance industry for over fifteen years spanning across Europe and USA with a depth of knowledge and experience within many aspects of the financial markets. Nikolas gained several years experience with some of the Europe’s leading Brokers, as equity analyst, and trader managing accounts for both Private and Corporate Investors. He enjoys both the fundamental and technical aspects of trading focusing on stock markets and all FX majors. Currently, Nikolas provides analysis and comments to online financial publications. Educational background in Economics (BSc), and Finance (MSc).