The Euro hit one week high at 1.1397 in early European trading on Thursday, in extension of previous day’s over 100 pips rally after dovish comments from Fed chief Powell changed sentiment. The greenback was sold across the board following Powell’s shift in policy outlook which much softer compared to hawkish tone in October. Powell described current US interest rates levels as being just below neutral (2.5% – 3.5%) that diverges from comments in October, when he said rates were long way from neutral. Markets took Powell’s comments as a tip that the interest rate cycle is close to its end and turned into riskier assets. Fresh risk-on mode supports the Euro, with focus turning towards release of minutes of Fed’s last policy meeting, due later today, for more clues about Fed’s tightening path. Expectations that Fed would pause rate hike cycle are increasing as fears of global growth slowdown, falling stocks and strong fall in oil prices would have negative impact on inflation. Improved daily techs (10,20,30SMA’s turned to bullish configuration and bullish momentum is rising) support for further advance. Today’s extension higher cracked pivotal barrier at 1.1393 (Fibo 61.8% of 1.1472/1.1267), close above which would generate fresh bullish signal. The notion is also supported by Wednesday’s bullish outside day pattern. Bulls eye targets at 1.1433 (22 Nov high) and 1.1472 (20 Nov high/falling 55SMA). Sustained break above 1.1472 is needed to sideline broader bears and generate stronger reversal signal. Broken 20SMA marks initial support at 1.1360 while return and close below 1.1345 (base of thick 4-hr cloud / broken Fibo 38.2% of 1.1472/1.1267) would soften near-term tone.
Res: 1.1397, 1.1433, 1.1472, 1.1500
Sup: 1.1360, 1.1345, 1.1300, 1.1267
