In Wednesday’s US session, the euro jumped sharply against the greenback. The US dollar index collapsed after Fed Chair Jerome Powell’s speech. He said that the key rate is “just below” the neutral level. This surprised investors given that just in early October, Powell had said that the rate is “a long way” from neutral. His remarks have increased speculation that the rate hike trajectory may now slow down.
According to CME FedWatch, the likelihood of a 25 base point rate hike is 82.7%. The current range of the Federal Funds rate is 2.00 – 2.25%.
Day’s news (GMT 3):
- 11:55 Germany: unemployment rate (Nov), unemployment change (Nov).
- 12:30 UK: net lending to individuals (Oct), mortgage approvals (Oct), consumer credit (Oct).
- 13:00 Eurozone: consumer confidence (Nov), industrial confidence (Nov), business climate (Nov), economic sentiment indicator (Nov).
- 16:00 Germany: CPI (Nov).
- 16:30 Canada: current account (Q3).
- 16:30 US: personal consumption expenditures – price index (Oct), personal spending (Oct), personal income (Oct), initial jobless claims (23 Nov).
- 18:00 US: pending home sales (Oct).
- 22:00 US: FOMC minutes.
Fig 1. EURUSD hourly chart.
By the end of yesterday’s trading sessions, the euro had gained 100 pips against the dollar to reach 1.1370. After a minor pullback, the bulls pushed further to reach a new high of 1.1392 in today’s Asian session.
The pair has broken out of the downwards channel and stopped at the 112th degree. The market situation looks contradictory to me. On the one hand, the bulls have opened the way towards 1.1420, while on the other hand, the 112th degree is sitting at the high from the 26th of November. Moreover, the 112th degree is a reversal level, making it a strong resistance. Hourly indicators are also hinting at a correction. We need to keep an eye on 1.1368. If this level doesn’t hold strong, the drop will continue to 1.1350 (blue channel).