On Monday the 17th of December, trading on the euro closed up. It recovered all of Friday’s losses against the background of an overall weakening of the US dollar and reports that Italian politicians reached an agreement on a new 2019 draft budget.
The dollar suffered from the statements of US President Donald Trump. He expressed surprise at the plans by the US Fed to continue raising interest rates. Before the FOMC meeting, there were doubts across the market about Wednesday’s rate hike. If by Wednesday in previous FOMC meetings the probability of a rate hike was more than 90%, now it’s at 70%, having fallen yesterday from 75%. Trump wanted to send Jerome Powell packing, so there is the chance that on Wednesday the Fed will find a reason no avoid raising rates so as not to raise the ire of the US President.
Day’s news (GMT+3):
9:45 Switzerland: SECO economic forecasts.
12:00 Germany: IFO business climate (Dec), IFO current assessment (Dec), IFO expectations (Dec).
16:30 Canada: manufacturing shipments (Oct).
16:30 US: building permits (Nov), new housing starts (Nov).
Fig 1. MA channel on the EURUSD hourly chart.
Sellers who aggressively sold the euro on the 14th of December at 11:00 candlestick (GMT+3) defended at the levels of 1.1305 and 1.1350. At present, they remain strong, and I see the strengthening of the euro as a correctional movement towards a drop from 1.1393 to 1.1270.
At the time of writing, the euro sits at 1.1338. I attached lines to the bases that are parallel to the line drawn along the lows 1.1306 – 1.1311. The dot represents the support. If the price bounces off the current level and updates the high from the Asian session, then we should prepare for the rate to rise to 1.1398. If the US Fed does not hike rates, then it will rise to 1.1470.
I made this forecast before the US session, and according to this, I am expecting a drop to the LB line – 1.1328, then after a correction to 1.1340, a drop to 1.1320. All euro crosses are trading in the red, so the drop could take place without a bounce.