Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Chart Of The Day: EUR/USD 1.10 Imminent 

By Fawad RazaqzadaForexDec 03, 2021 06:39
ca.investing.com/analysis/chart-of-the-day-eurusd-110-imminent-200494743
Chart Of The Day: EUR/USD 1.10 Imminent 
By Fawad Razaqzada   |  Dec 03, 2021 06:39
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

This article was written exclusively for Investing.com

The FX markets have been fairly quiet given how volatile the equity markets have been. As another week draws to a close there is still a lot of uncertainty hanging over the markets with regards to the new COIVD variant, Omicron.

Today’s US nonfarm payrolls (NFP) report should trigger some volatility and may lead to renewed dollar strength, so long as we don’t see a very disappointing set of numbers, especially on the wages front.

The EUR/USD will be in focus, along with other dollar pairs:

EUR/USD Daily
EUR/USD Daily

The world’s most heavily-traded pair created a hammer candle on the weekly time frame last week. Usually, such hammers indicate that the preceding bearish trend has ended. While that may turn out to be the case, the fact that we haven’t seen any significant follow-through to the upside suggests otherwise.

Indeed, I reckon the hammer may well prove to be a trap for the bulls. Already, the price has started to go back within last week’s ranges after a brief stay above the high. But as it is an NFP week, we were never going to see sharp moves ahead of the data anyway. 

If the bulls are indeed trapped, we may well see some further weakness to take us to levels where stops are resting. The most obvious place would be below last week’s hammer candle at 1.1185. But then why can’t it go even lower? Why not, for example, head to 1.1000—the base of the breakout in May last year.

Fundamentally, there’s currently very little obvious reasons why the EUR/USD should be going higher. Indeed, in terms of who is the more hawkish central bank, the Federal Reserve is head and shoulders above the European Central Bank. 

Fed Chairman Jerome Powell has effectively admitted the Fed’s “transitory” view of inflation was wrong and that they could wrap up bond purchases in the next few months, despite the threat of Omicron variant. The market has brought its first full rate hike expectations forward, accordingly.

In contrast, the ECB is unlikely to reduce stimulus faster than it had previously projected despite inflation surging to 4.9%. The ECB will meet on Dec.16 to decide whether to end its emergency bond purchases in March, as planned, and what to do thereafter.

Given the recent upsurge in virus cases across the Eurozone and uncertainty over the Omicron variant, the ECB may well have to delay any decision on bond purchases for a couple of months at least.

The potential for new disruptions to economic activity as a result of full or partial lockdowns means the central bank may decide to increase its bond purchases under its Asset Purchase Programmes (APP) when the Pandemic Emergency Purchasing Programme (PEPP) ends in March.   

The only obvious caveat to the bearish EUR/USD forecast is that the FX market may have already priced in the growing rate disparity between the Fed and ECB. After all, the EUR/USD has been heading lower since the start of the year.

Still, even if that’s the case and the above weekly hammer candle turns out to be a genuine bullish reversal, the upside should be capped, with key resistance around 1.1450 to 1.1500 likely to be the ceiling until something fundamentally changes.   

All told, the outlook remains bearish on the EUR/USD and I reckon 1.100 could be revisited very soon. 

Chart Of The Day: EUR/USD 1.10 Imminent 
 

Related Articles

Chart Of The Day: EUR/USD 1.10 Imminent 

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email