Despite having risen against a weaker dollar amid recent Fed caution and weaker eco data, the euro started the year soft.
The trade war was seen as positive for the dollar, owed to safe-have flows. This could weigh on the euro over the next few weeks as Trump pushes for a January 15 phase one trade deal.
In addition, there is an assumption that Lagarde is ready to launch a dual interest rate policy in order to provide a more effective QE. This is a strategy that points to a somewhat more powerful stimulus since interest rate cuts haven’t really boosted the European economy.
EUR/USD Breakout Running Out of Steam
The prices of eurodollar reached a multi-month high at 1.1239 last Tuesday, suggesting that 2020 could provide further upside. Both indicators point to a correction at least in the short-term, if not a reversal.
With 1.12 round support taken out once already, the chances of additional weakness are increasing. This could take prices down to 1.1175, provided any bullish attempt is rather soft.
