The common European currency continues to depreciate against the dollar as yet another support level, this time the one at 1.1957, was easily violated at the end of last week. The forecast is for the sell-off to continue, pushing the currency pair towards a test of the support at 1.1860. In the positive direction, the key resistance level is 1.2028. This week, investors’ attention will be focused on the European Central Bank interest rate decision (Thursday; 12:45 GMT) and the CPI data for the U.S. (Wednesday; 13:30 GMT).
The currency pair continues its corrective phase after it had previously reached the local bottom of 1.1582 and, at the time of writing the analysis, the EUR/USD is headed towards a test of the resistance level of 1.1640. A successful breach would allow the bulls to attack the resistance zone of 1.1690. Alternatively, if the test fails, the most likely scenario would be for the pair to retrace and consolidate at around 1.1580. During today’s session, volatility could spike when the data for the building permits for the U.S. is announced (12:30 GMT).
NZDUSD trading volumes began to decline. The New Zealand currency is correcting against the US dollar on the background of positive macroeconomic statistics and is now near 0.6746.
International trade continues to grow. As of November, New Zealand’s imports rose to 6.73B NZ dollars and exports reached 5.86B NZ dollars. The trade balance in November amounted to -864M NZ dollars, and in annual terms, the figure was fixed at -6.040B NZ dollars.
The positive dynamics of the recovery of the national economy can be traced by statistics of Credit Card Spending: in November, the figure was -0.1%, which is significantly better than -5.2% shown a month earlier. Thus, despite the impact of the coronavirus pandemic, the indicators continue to improve with confidence, supporting the exchange rate of the New Zealand currency.
The US dollar remains at its opening levels for the week, just above 96.500 in the USD Index. Trading volumes dropped markedly due to investors leaving for the Christmas holidays. Perhaps the only news that could change the rate of the US currency was a bill to allocate 2T US dollars to support the national economy, but, according to the leader of the majority in the US Senate Chuck Schumer, Democrats will consider this issue only in 2022.
Support and resistance
Quotes of NZD/USD are correcting within the next downward wave of the global downward channel. Technical indicators hold a stable sell signal, but do not exclude corrective growth: the range of the Alligator indicator EMAs fluctuations continues to narrow down and the histogram of the AO oscillator forms local ascending bars being in the sales area.
The bulls failed to gain enough momentum and the upward move was limited at the 1.1668 resistance zone. At the time of writing, the currency pair is just above the support level of 1.1623, and this time, the bears could gain enough strength for a successful breach of that level. An unsuccessful breach, on the other hand, could form a short-term range between 1.1632 – 1.1668. Today, the data on the preliminary manufacturing PMI for the euro area (08:00 GMT) could affect the volatility of the market.
USDCHF the likelihood of the growth of the instrument remains
USDCHF the likelihood of the growth of the instrument remains. The USD/CHF pair moves within a long-term uptrend, growing from the 0.9175 support level to the target at 0.9260.
The positive dynamics of the asset was caused by the strengthening of the US dollar against all major currencies, supported by analysts’ expectations, who believe that this week, the US Federal Reserve officials will decide to accelerate the curtailment of the bond purchase program and will report an increase in interest rates in 2022.
The regulator meeting will be held tomorrow, after which at 21:00 (GMT+2), economic forecasts and the statement of the Federal Open Market Committee of the US Federal Reserve (FOMC) will be published, and the decision on the interest rate will be announced. It is expected to remain at 0.25%, so investors’ attention will be focused on a press conference, where the head of the department, Jerome Powell, is likely to clarify the specific timing of the interest rate hike in 2022 to combat high inflation.
In general, the American labor market allows one to think about tightening monetary policy. Unemployment is declining. Last week, Initial Jobless Claims was a record low and amounted to 184K instead of the forecast of 215K. The index of consumer expectations from the University of Michigan for December (preliminary data) was 67.8 points. Analysts predicted a value of 62.0 points against the previous figure of 63.5 points.
The consumer sentiment index from the University of Michigan for the same period (preliminary data) amounted to 70.4 points, which is better than the forecast of 67.1 and the previous value of 67.4 points. Against this background, the news about the growth of the producer price index in Switzerland for November by 0.5% did not provide significant support to the franc.
Support and resistance
The long-term trend is upward with the target at 0.9260, the breakout of which will allow reaching 0.9339.
The medium-term trend is downward. Last week, market participants tested the key resistance of the trend 0.9280–0.9269, but so far, it is holding, maintaining the likelihood of a decline in quotations with the target at the November low.
The currency pair is currently holding steady above the support of 1.1582, but the momentum of the bulls was not strong enough to test the resistance of 1.1640. Two scenarios are possible in the development of this complex pullback. In the first one, the failure of the bears to breach the 1.1528 support would make them look for better prices above 1.1582 and to fill in their ranks. In this case, a breach of 1.1528 would provoke a drop towards 1.1400. Given that the bulls are able to hold their positions and manage to attack 1.1640, they would heighten their chances for success and the next target for them would be the zone of 1.1670-1.1690. This week, the more significant news affecting the pair is the housing data for the United States on Tuesday at 12:30 GMT.
The attempt to breach the support of 1.1623 was not successful and, at the time of writing this analysis, the currency pair is preparing to test the resistance zone between 1.1668 and 1.1687. A violation of the mentioned zone will pave the way towards the next goal of 1.1750, a breach of which would strengthen the positive expectations for the future path of the EUR/USD. On the downside, bears could attack the support level of 1.1623 and, if successful, could easily deepen the drop towards the level of 1.1582. A spike in volatility is likely during the announcement of the economic data for the initial jobless claims for the U.S. (today; 12:30 EEST).