Forex

The pair is on the back foot this week, as markets digest recent strong US economic data and contemplate the rate path of the Fed and the ECB

The pair finds support after its poor start to the week, as the RBA kept the door open to more rate increases, while markets continue to assess the Fed’s path and monitor the pandemic news form China

The EURUSD continues to trade in its bullish channel (between the upper blue and red bands) on its daily time frame. However, the hourly chart does show a pullback is in effect, with the EMAs and stochastic both in bear mode. There is a triple confluence of support at the central pivot - the 50% Fibonacci level and price support overlap. Thus, this may be a level that is attractive…

Whilst the core PCE came in under expectations, we are cautious. On Friday, wage inflation printed 0.6% MoM, double the monthly forecast of 0.3% MoM. This surprise means that average hourly earnings are up 5.1% YoY compared to last month's 4.9%.

The EURUSD has pushed higher into the daily chart's bullish channel between the upper blue and red bands. The hourly chart shows bullish developments too. Its trend-following EMAs have developed angle and separation to the upside, and the stochastic is looking to cross up (black ellipses). If the stochastic pushes above 80 and maintains, an underlying bullish momentum will be building, which may take EURUSD passed its R2 pivot level.

Yesterday at the Brookings Institution, Fed Chair Powell confirmed the slowing of policy tightening. The 14 December hike has close to an 82% probability of 50bps as opposed to 18% for 75bps. However, the Fed Chair suggested a higher terminal rate than anticipated.

November was the pair’s worst month since 1984 due to expectations for a moderation in the rate hike pace by the Fed, which were reinforced by Chair Powell’s speech on Wednesday

Fed Chair Powell is due to speak about the economy, inflation and employment at the Brookings Institution at 6:30 pm GMT. He will likely take the opportunity to reiterate the slowing of rate hikes to 50bps after four 75bps increases. However, he is also likely also to emphasise the fight against inflation. A tighter policy will continue until the Fed has managed to reign inflation in

The pair finds support today after the rejection of key levels at the start of the week, as markets brace for Mr Powell’s speech and important economic data from the US

The pair heads towards its best month of the year, but faces difficulties this week, as markets contemplate China’s Covid-19 situation and poor PMIs, ahead of key US economic data

The pair concluded yesterday’s volatile session in the red, despite setting five-month highs, but finds support today