The Euro (EUR) continued its losing streak against the US Dollar (USD) in December, dragging the price of EURUSD to less than 1.0450 following the announcements of landmark monetary policies from both –the Federal Reserve as well as European Central Bank (ECB) – unveiling completely opposite monetary policy directions. The technical bias remains bearish because of a lower low and lower high in the recent upside rally.
As of this writing, the pair is being traded around 1.0436. A support can be seen near 1.0334, the low of January 2003 ahead of 1.0206, a key horizontal support area and then 1.0000, the landmark parity level where we expect a major buying interest. However, a break and daily closing below the parity line shall incite renewed selling interest, validating a move towards the 0.9613 support zone.
On the upside, the pair is expected to face a hurdle near 1.0438, the horizontal resistance ahead of 1.1610, a confluence of numerous resistance levels and then 1.1876, the low of June 2016 which shall act as critical resistance zone. The technical bias shall remain bearish as long as the 1.1610 resistance area is intact.
Fed/ECB Monetary Policies
Earlier this month, the US Central Bank, Federal Reserve increased its benchmark interest rate for the first time in 2016, signaling at least three more interest rate increases by the end of next year – a highly hawkish stance which was not expected by economists.
On the other hand, the ECB took a 360-degree opposite stance, although they decreased the size of monthly bond purchases but the bank unexpectedly increased the time period for the ongoing quantitative easing program – a highly dovish stance which was not expected by economists. The ECB decision shows that things are still bad for the Eurozone and the central bank is highly concerned about low inflation and fragile economic growth in European countries.
Considering the overall technical and fundamental outlook, selling the pair on short term rallies appears to be a good strategy for near term trading. 1.1876 (as mentioned before) could be a good selling point if we get a valid bearish reversal candle on the daily chart.