As was widely expected, ECB remained on hold at 0.0% yesterday and during the announcement of the decision there was little volatility for EUR. The accompanying statement, had few changes with highlights being the halting of the bank’s 2.6 T EUR QE program and mentioning its plans for reinvestment. In the following press conference, ECB president Mario Draghi mentioned that weaker data reflects softer external demand, inflation is expected to continue to converge, underlying strength fuels confidence in inflation and that he sees somewhat slower growth momentum ahead. As a result the common currency weakened, as Mario Draghi’s comments seemed to sound more on the dovish side. It was characteristic that the ECB president answered one question by saying that the ECB has continued confidence but with increasing caution. We see the case for the common currency to be under pressure, however today’s financial releases could provide some support.
EUR/USD dropped yesterday, during Mario Draghi’s press conference, briefly breaking the 1.1345 (S1) support line, however corrected higher later on. We could see the pair retaining a sideways movement, however we expect to be sensitive to the financial releases today as they affect both sides of the pair. Should the bulls take over the pair’s direction we could see it breaking the 1.1385 (R1) resistance line and aim for the 1.1425 (R2) resistance level. Should the bears dictate the pair’s direction we could see it breaking the 1.1345 (S1) support line and aim for the 1.1305 (S2) support barrier.
USD firms ahead of Fed’s meeting
The USD firmed its stance yesterday against a number of its counterparts, however gains seemed capped due to the uncertainty surrounding the future intentions of the Fed. The Fed is widely expected to hike rates in its next meeting on the 19th of December however greater focus could be placed on the policy outlook for 2019. Analysts point out that there is a lot of disagreement in the markets over the Fed’s future rate hike path in 2019 and traders could be expecting anything in the range of 1 to 4 rate hikes. As the Fed’s meeting draws near, we expect the USD to have the upper hand over the JPY and EUR, however today’s financial releases could weaken it.
USD/JPY rose yesterday above the 113.25 (S1) support line, reflecting the firming of the USD side of the pair, however corrected lower during the Asian session. Technically, we could see an upward trendline starting to form as a number of higher peaks (10th, 12th and 13th of December) and a higher troughs (11th, 12th and 14th of December) could indicate. Should the pair find fresh buying orders along its path we could see it breaking the 113.95 (R1) resistance level and aim for higher grounds. If on the other hand, the pair comes under the selling interest of the market, we could see it breaking the 113.25 (S1) support line and aim for the 112.72 (S2) support barrier.
In today’s other economic highlights:
In today’s European session, we get from the Eurozone, Germany and France the preliminary PMI’s for December. In the American session, we get from the US the retail sales growth rates and industrial output growth rates for November, while later on we get the Baker Hughes oil rig count. Also please be advised that the Euro Summit could provide volatility for EUR pairs as well as the GBP.
USD/JPY H4
Support: 113.25 (S1), 112.72 (S2), 112.15 (S3)
Resistance: 113.95 (R1), 114.50 (R2), 115.70 (R3)
EUR/USD H4
Support: 1.1345 (S1), 1.1305 (S2), 1.1265 (S3)
Resistance: 1.1385 (R1), 1.1425 (R2), 1.1470 (R3)
