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The EUR/USD gave back all of its previous week gains and sunk down to the 1.0800 region following the decision of the US Central Bank, to raise its rates by 25bp. And while the move has been largely anticipated, the dollar surged anyway against most of its rivals. 

The common currency enjoyed from a couple of weeks of joy, as Mario Draghi offer a much softer extension of its easing program that what the market was expecting. Now, as the imbalance between both Central Banks has become more wider, the pair should resume its bearish trend. The market however, may take some time to react, with the upcoming two weeks been characterized by extreme low volatility due to the winter holidays. Action next  week will depend on the release of US GDP final reading for the Q3 and Durable Goods Orders, but for the most, trades will be booking profits and squaring positions for 2016.

View the Live chart of the EUR/USD

The weekly chart, shows that during the past two weeks the pair's advance was contained by the 20 SMA around 1.1050, while the 100 SMA continues heading lower far above the current level, and the technical indicators turned south below their mid-lines, in line with further declines. In the daily chart, the pair has been capped by selling interest around 1.0880 since late Wednesday, the 38.2% retracement of the 1.1494/1.0505 decline between October and December, supporting the longer term view an lowering the bar for a bullish rally. 

Also in the daily chart, the pair has been finding buying interest around 1.0800, a bullish 20 SMA, while the technical indicators have corrected their overbought readings, and are currently becoming neutral well above their mid-lines, not yet enough to confirm a downward continuation. A bearish extension below 1.0790 however, may see the pair moving towards 1.0730, the 23.6% retracement of the same rally, with a break below it, being much more supportive of the bearish case and leading to a decline down to the 1.0620/40 region.  Above 1.0880 the pair can spike up to 1.0940, while above this last the pair can approach again to the 1.1000 level before resuming its decline into next year.


Latest updates on the EUR/USD Forecast

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