Today we shall take a look at the EUR/USD currency pair. For over ten days now the exchange rate of this pair has been moving within a downward wave. By all accounts, the pair might continue its decline if the market conditions remain the same.
The European single currency continues to weaken against the dollar. Naturally, a huge reason for this trend is the ultra loose monetary policy of the European Central Bank. Despite rising inflation, the ECB has insisted that it is too early to even speak of interest rate hikes, which has created a big divergence with the more hawkish-minded Federal Reserve. To make matters worse, the European Union is once again facing a hard winter with a spike in coronavirus infections. Austria became the first EU country to enter a lockdown this season, but neighboring Germany, which is the strongest member of the bloc economically, might also have to resort to such measures, considering the spread of Covid-19 there. Other EU member states are also not completely safe. With the absence of any important fundamentals from Europe in the next couple of days, the euro has no choice but to remain weak.
On the other hand, the US dollar is gaining momentum against all major currencies. Although the Federal Reserve had given numerous assurances that it would not move up the timeline for rate hikes, the recent increases in inflation are seen as worrisome by even the most dovish-minded member of the Fed (Richard Clarida). To that end, Clarida’s willingness to at least begin discussing a more appropriate timeline of rate hikes, combined with robust retail sales data and inflation close to 6% in the United States have all contributed to more confidence among investors that the US will experience a tighter monetary policy soon. This, in turn, is boosting the US dollar in the long term.
In terms of the daily chart, today we have a pivot point for the pair located at 1.1280, with the price currently trading slightly below it. The daily support levels lie at 1.1268 and 1.1260. The daily resistances are located at 1.1288 and 1.1300. The indicators of technical analysis strongly agree in recommending a sell position today.
