Winter Festivities Slow Down the Market’s Pulse
EUR/USD Reaches 6-Month High as the Fed and ECB Continue to Tighten.
A busy week, full of economic releases has just ended and the last trading week before Christmas is underway, with a lackluster schedule. The Fed and ECB both decided to hike their respective rates as anticipated but they also signaled that more hikes are coming.
The U.S. CPI numbers came below expectations, sending an upbeat vibe and generating optimism in the fight against inflation. But despite this, the Fed adopted a hawkish tone, and Chairman Powell made it clear that monetary policy will continue to tighten.
EUR/USD continued on its bullish path for the first part of last week, reaching a 6-month high, but pulled back in the second part. The US Dollar erased some of its losses but had a wobbly start to this week and allowed the Euro to climb during Monday’s early trading session.
Key Data for the Week Ahead
This will be a slow economic week, which is normal due to the fast-approaching winter festivities. Wednesday at 3:00 pm GMT the CB Consumer Confidence comes out, showing the opinions of about 3,000 surveyed households about the overall economic situation in the U.S. It usually has a notable impact only if there’s a hefty difference between the actual number and the forecast.
Thursday at 1:30 pm GMT the U.S. Final GDP comes out, but its impact is often soft because this is the third version (Advance, Preliminary, and Final) and tends to be overshadowed by the earlier ones.
The final release of the week is also the most important: the Core PCE Price Index. It shows changes in the price of goods and services bought by individuals and it’s one of the Fed’s main gauges of inflation. However, the CPI is released about 10 days earlier and tends to get the most attention. The indicator will come out Friday at 1:30 pm GMT.
Technical Outlook – EUR/USD
The pair is currently trading just below the resistance at 1.0635 and we can consider it overbought although the RSI has not breached its 70 level. Since early November, the pair has been making higher highs while the RSI has been bouncing at its upper level, without breaching it. This is a form of bearish divergence, albeit a weaker one.
If the Euro bulls fail to close a daily candle above 1.0635, then we can expect a retracement that will take the price into the middle line of the Bollinger bands. On the other hand, a daily close above the current level (1.0635) will open the door for a move toward 1.0775, which is a stronger resistance.
