EUR/USD: bearish outlook
EUR/USD slid to a new low of 1.2210 as the monetary policy divergence between the ECB and the Fed keeps on growing. There are not so many potentially market moving releases left in euro zone for December. Pay attention to the December inflation data on Jan. 7 – euro area price growth could fall to 0.
Internal politics will also impact the EUR/USD rate in the coming weeks. Markets will be focused on the second and the third rounds of the Greek presidential election on Dec. 23 and 29. Failure of the Samaras’s government to get a required number of votes to support their candidate will trigger early election. Victory of the radical leftist Syriza party that doesn't support the Greek bailout program would raise concern about the euro zone’s stability and pressure EUR/USD.
As can be seen from the weekly chart, the pair formed another “bearish engulfing” candle, pointing for more downside to come. Strong support lies at 1.2200 – this where the long-term trend line and the 200-month MA coincide. Break below this area would open the way to the new lows: watch the 1.2040, 1.2000 and 1.2870 levels below the price.