EUR/USD: Calm before the interest rate storm
The central banks of the most traded currency pair are both making very important interest rate decisions this week in quick succession.
On Thursday (8.00am NZDT) the US Federal Reserve will deliver its final interest rate decision for the year. Less than 24 hours later, the European Central Bank will deliver its own decision.
What these decisions will be, especially in the case of the US Federal Reserve, are not agreed upon by the market. In the US, Fed policymakers are expected to raise rates by 50 basis points following four consecutive 75 bps hikes, although a 25-basis-points hike is also a possibility that has been thrown around lately. Boosting the chance of a smaller-than-expected rate hike is The NY Federal Reserve recent survey which showed consumers are growing more optimistic about inflation. Consumers see one-year inflation at 5.2%, down 0.7 percentage points from the October reading. On Tuesday, we get the real figure though, with November’s inflation YoY rate due at 2.30am. This data point will likely be one of the biggest factors contributing to the Fed decision on Thursday, and consequently, the direction of the EUR/USD.
In Europe, markets are expecting a 50bps hike, following two straight 75bps rate increases.
Looking at the daily chart, the EUR/USD has printed consecutive higher highs for the last three months. With the help of the ‘Investing Zones’ indicator, we can try to illuminate the current trend for the EUR/USD, and whether the trend is strong enough to break crucial levels. Ultimately the goal of this indicator is to suggest buy or sell zones, depending on the trend of the market.
Looking closely, we can see that the Investing Zones' Alma Trend Ribbon (blue for uptrend and pink for downtrend) is boldly blue, indicating the strength of the current uptrend. The trend’s strength rating is also determined by how far the price is above or below the Alma Trend Ribbon. In this case, the EUR/USD price is comfortably above the Alma Trend. This idea is also supported by the price hovering in the green zone, which suggests buyers are the primary bias affecting this pair at this point.
Interestingly, after the price entered the green zone and the Alma Trend switched to blue, the price reached the first resistance level marked by the black dotted line. This supports the idea that the 1.0600 is a crucial price level that must be broken first for the uptrend to continue. If the price breaks and closes above the black dotted line, the upper band of the indicator at around 1.1000, might be set as a new target level.
On Thursday (8.00am NZDT) the US Federal Reserve will deliver its final interest rate decision for the year. Less than 24 hours later, the European Central Bank will deliver its own decision.
What these decisions will be, especially in the case of the US Federal Reserve, are not agreed upon by the market. In the US, Fed policymakers are expected to raise rates by 50 basis points following four consecutive 75 bps hikes, although a 25-basis-points hike is also a possibility that has been thrown around lately. Boosting the chance of a smaller-than-expected rate hike is The NY Federal Reserve recent survey which showed consumers are growing more optimistic about inflation. Consumers see one-year inflation at 5.2%, down 0.7 percentage points from the October reading. On Tuesday, we get the real figure though, with November’s inflation YoY rate due at 2.30am. This data point will likely be one of the biggest factors contributing to the Fed decision on Thursday, and consequently, the direction of the EUR/USD.
In Europe, markets are expecting a 50bps hike, following two straight 75bps rate increases.
Looking at the daily chart, the EUR/USD has printed consecutive higher highs for the last three months. With the help of the ‘Investing Zones’ indicator, we can try to illuminate the current trend for the EUR/USD, and whether the trend is strong enough to break crucial levels. Ultimately the goal of this indicator is to suggest buy or sell zones, depending on the trend of the market.
Looking closely, we can see that the Investing Zones' Alma Trend Ribbon (blue for uptrend and pink for downtrend) is boldly blue, indicating the strength of the current uptrend. The trend’s strength rating is also determined by how far the price is above or below the Alma Trend Ribbon. In this case, the EUR/USD price is comfortably above the Alma Trend. This idea is also supported by the price hovering in the green zone, which suggests buyers are the primary bias affecting this pair at this point.
Interestingly, after the price entered the green zone and the Alma Trend switched to blue, the price reached the first resistance level marked by the black dotted line. This supports the idea that the 1.0600 is a crucial price level that must be broken first for the uptrend to continue. If the price breaks and closes above the black dotted line, the upper band of the indicator at around 1.1000, might be set as a new target level.
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