EUR/USD analysis: dollar strengthens as Fed hints a December hike

EUR/USD Current price: 1.1363

  • US Federal Reserve kept rates unchanged as expected, remained hawkish on the economy.
  • European Commission autumn economic forecast lowered growth perspectives.

The common currency extended its decline against its American rival to trade near 1.1400 ahead of the US Federal Reserve monetary policy announcement. The dollar recovered ground on the back of fading hopes of a Brexit deal and persistent tensions between the EU and Italy over the country's budget.  Italy insists that the maximum deficit will be of 2.4%, while the EC sees it at 2.9%, having already rejected the draft. Italian FM Tria said that the EU forecast in sharp contrast with the government´s estimates due to the partial reading of the budget. Nor the EU neither the US published relevant macroeconomic figures, although the common currency was hurt by the European Commission autumn economic forecast which lowered growth perspectives.  The US released Initial Jobless Claims for the week ended November 2, which resulted as expected as 214K, while the previous week reading was upwardly revised to 215K.

The US Federal Reserve brought no surprises, leaving rates unchanged as largely expected and maintaining a hawkish stance, paving the way for a December hike with an upbeat assessment of the economy. Friday will be a quiet day in terms of macroeconomic releases, with the only relevant figure being the preliminary Michigan Consumer Sentiment Index for November, expected at 98.0 from the previous 98.6.

Ahead of the Asian opening, the pair is trading at around 1.1360 and the 4 hours chart shows that the price settled below its 20 and 100 SMA, both converging with the 23.6% retracement of the September/October slide around 1.1420 now an immediate resistance. Technical indicators in the mentioned chart have extended their retracements from overbought readings, with the Momentum and the RSI gaining downward strength into negative ground. As long as below 1.1420, chances are of a downward extension for this Friday, with room to re-test the yearly lows at 1.1300.

Support levels: 1.1350 1.1300 1.1265

Resistance levels: 1.1425 1.1460 1.1495    

View Live Chart for the EUR/USD

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