Currency Analyst since 2010

EUR/USD: forecast for December 14-20

By Elizabeth Belugina

EUR/USD tested higher levels in the past week, though remained below important resistance marks. The market’s attention will be focused on the upcoming meeting of the Federal Reserve. Although we don’t expect so see big bullish drivers for the American currency, we can’t forget that a rate hike, even small, will once again increase divergence in monetary policy between the Fed and the ECB. This divergence is in favor of the US dollar.

The past week gave no important information about the euro zone’s economy. Next week the most important events in the European economic calendar will be flash manufacturing and services PMIs on Wednesday, because it’s the most recent and fresh data. Also watch German releases: ZEW economic sentiment on Tuesday and Ifo business climate on Friday.

Remember that high euro will be very unwelcome by the European Central Bank: the policymakers will have to intervene, at least verbally, if the advance continues. There are still many resistance levels on the upside: daily MAs, bottom of the daily Ichimoku Cloud at 1.1060, 61.8% Fibo of the October-November decline at 1.1115 and 1.1215/40 (weekly Ichimoku Cloud bottom). Supportisat 1.0880, 1.0800 and 1.0735. 

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