EUR/USD Mixed in the Aftermath of CB Activity



The common currency does not react to Eurozone's Consumer Price Index which steadied at 4.9% y/y in November, while on a monthly basis it eased to 0.4%, from 0.8% in October.

This week's main events though, were the monetary policy decisions from the US and the European central banks.

The Federal Reserve announced a faster tapering of its Quantitative Easing (QE) program and its staff projections point to three rate hikes within the next year.

The ECB yesterday announced a timid tapering, as the 2020-launced Pandemic Emergency Purchase Programme (PEPP) will be discontinued from March 2022, but the preceding Asset purchase programme (APP) will be ramped up from current €20 billion/month.

It will run at pace of €40 billion/month in the second quarter and €30 billion in the third quarter. From October onwards, purchases will be maintained at 20 billion euros, for as long as necessary to reinforce the accommodative impact of its policy rates.

The Fed's hawkish pivot was largely priced-in and the ECB's balancing act was supportive for EUR/USD, allowing it to register a two-day advance. Over the last few weeks, it has managed to contain the October-November drop, but it is clear that it struggles to make progress. Furthermore, the policy differential remains unfavorable.

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The technical outlook is little changed and the pair lacks firm direction today. Above the EMA100, it can push for fresh December highs and the 1.1380 area, but daily closes above it will be required for a larger recovery towards and beyond 1.1397.

Despite heading towards a profitable week, the common currency does not yet inspire confidence, with the broader downtrend still in place. As such, risk for a return back to the mid-1.1200 persists, although new 2021 lows (1.1184) may prove elusive for now.

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Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.


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