USD Gains on Fed Comments, EUR Weakens

The USD gained against its counterparts on Friday, as the Fed’s Vice Chairman Richard Clarida stated that the Fed may discuss the taper pace in its next meeting in December. The statement made headlines, causing market participants to consider the possibility of a faster tightening of the bank’s monetary policy as well as the possibility of earlier rate hikes to come. On the other hand, the EUR weakened against the USD, restarting its slide, as ECB President Lagarde reiterated that a rate hike by the bank in 2022 is unlikely, which was considered as a dovish signal in the markets. It should be noted that the bank’s ultra-loose monetary policy seems to find opposition from within, as Germany’s BuBa President Weidman seems to oppose it and made public statements arguing his case on Friday, raising the stakes for the bank’s December meeting. It should be noted that the pound retreated against the USD and JPY on Friday, yet gained against the broadly weaker EUR, failing to capitalise on the better-than-expected retail sales growth rate for October. Also the Loonie’s slide against the USD seems to continue as the commodity currency was pushed even lower by weakening oil prices but also the possible effect of a rise in Covid cases in Europe on global trade. Gold’s price also tended to be on the retreat as the USD was on the rise, yet inflation worries could support the precious metal as a safe haven. Oil prices seemed to be under pressure as the market eyes the possibility of a number of countries releasing part of their oil reserves which could relieve the tight supply of the oil market.

The USD index regained momentum on Friday testing the 96.15 (R1) resistance line. We tend to maintain a bullish outlook for the index’s direction as long as its price action remains above the upward trendline incepted since the 10 of November. Should the USD come under the buying interest of the market we may see the index breaking the 96.15 (R1) and take aim for the 96.65 (R2) resistance level. Should the sellers take the initiative over buyers, for the index’s direction we may see the USD Index reversing course, breaking the prementioned upward trendline the 95.60 (S1) support line and take aim for the 95.10 (S2) level.

EUR/USD dropped on Friday breaking the 1.1300 (R1) support line, now turned to resistance. We tend to maintain a bearish outlook for the pair as long as it remains below the downward trendline incepted since the 10 of the month. Should the bears actually maintain control over the pair’s direction, we may see the pair breaking the 1.1225 (S1) support line and aim for the 1.1165 (S2) support level. Should the bulls say enough is enough and take over, we may see the pair reversing course breaking the 1.1300 (R1) resistance line, the prementioned downward trendline and aim if not break the 1.1370 (R2) resistance line.

Other market highlights for today

Today in the American session we get Eurozone’s preliminary consumer confidence for November and from the US the existing home sales figure for October. Just as the Asian session is about to start, we get from New Zealand the retail sales growth rates for Q3 and from Australia the manufacturing PMI figure for November.

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On Tuesday, we get Australia’s, France’s, Germany’s, Eurozone’s, UK’s and the US preliminary Markit PMI figures for November. On Wednesday we get Japan’s preliminary Jibun Manufacturing PMI figure for November, Germany’s Ifo indicators for November and from the US the durable goods order growth rates for November, the second estimate of the GDP rate for Q3, the weekly initial jobless claims figure the consumption rate for October, the final University of Michigan consumer sentiment reading, while the Fed is to release the minutes of its latest meeting. On Thursday, we get from Australia the Capital Expenditure growth rate for Q3, and we also note from Sweden Riksbank’s interest rate decision. On Friday we note the release from Japan of Tokyo’s CPI rates for November while later on we get from Switzerland the GDP rate for Q3.

EUR/USD H4 Chart