EUR/USD analysis: bearish, but ECB and Fed in the way

Valeria Bednarik FXStreet

EUR/USD Current price: 1.1772

US mixed data interrupted dollar's rally on Friday.
Fed still in the path of raising rates this Wednesday.

The American dollar finalized the week with gains against all of its major rivals, despite easing some on Friday amid a mixed monthly employment report and a weaker-than-expected Michigan consumer sentiment index, which resulted at 96.8 for December, down from 98.5 in November. The EUR/USD pair closed at 1.1772 after reaching a 2-week low of 1.1729, shedding roughly 100 pips weekly basis. As for the US employment report, the headline was encouraging, as the economy created 228K new jobs, while the unemployment rate remained at 4.1%, but, as usual, wages' growth was slow. Average hourly earnings came in at 0.2%, below the expected 0.3%, while from a year early, wages grew by 2.5%, missing market's forecast of 2.7%.

Focus shifts now to Central Banks, as the Fed and the ECB will have monetary policy meetings these days. None of them is expected to surprise, although the US Federal Reserve is expected to provide a third yearly rate hike. In both cases, market's reactions will depend on how policymakers foresee the future of monetary policy.

Technically, the EUR/USD pair is at risk of falling further, given that in the daily chart it settled below its 20 and 100 DMAs, whilst technical indicators entered negative territory, maintaining their bearish momentum. Furthermore, the pair broke below the 61.8% retracement of its previous weekly advance, which converges with the mentioned 100 DMA at 1.1800, becoming the immediate resistance. Shorter term, the upward potential also seems limited, as in the 4 hours chart, the price settled below a bearish 20 SMA, while technical indicators managed to correct oversold conditions before losing strength upward, still within negative territory. The key support is November 21st low at 1.1712, with a break below it favoring a test of the strong static support at 1.1660.

Support levels: 1.1750 1.1710 1.1660

Resistance levels: 1.1800 1.1830 1.1860

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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