The pair had posted its best week in more than two year earlier in the month, due to soft CPI inflation report in the US, which led to a dovish repricing around the Fed's rate path. Last week though, the profitable streak stopped, as investors digested a series of Fed-speeches.
Even though many officials appeared to consider a smaller rate hike at the December meeting, most of them appeared hawkish stressing the need for more increases. At the time of writing, CME's FedWatch expects a 50 basis point hike in December, but the highest probability is assigned to a terminal rate of 5.25%, after a recent pullback.
The European central bank has also been raising interest rates aggressively and policy makers expect more tightening ahead, but they have also been contemplating the size of the next move, while being vague around the target rate.
Along with a deterioration in sentiment, partly from the Covid-19 situation in China which reported its first deaths in the mainland in a while , EUR/USD slides for third straight day. Immediate bias in on the downside and we could see a breach of 1.0194 and the 38.2% Fibonacci of the November High/Low advance, but a retest of parity does not seem easy.
Above the 38.2% Fibonacci though, the recent upside momentum remains intact and EUR/USD has the ability to retake the 200Day's EMA (at around 1.0400), although new catalyst will likely be required for fresh highs above 1.0482.
Senior Financial Editorial Writer
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.