EUR/USD analysis: Fed delivered, dollar fell

EUR/USD Current price: 1.1816

  • The US Federal Reserve hiked rates by 25 bps, still confident on growth, puzzled on inflation.
  • ECB monetary policy meeting up next, alongside with preliminary Markit PMIs for December.

The American dollar started the day with the wrong footing and ended it even worse, down at the beginning of the day against its major rivals during the Asian session, amid retreating equities and yields, on a cautious mood ahead of Fed's monetary policy decision. Ahead of Wall Street's opening, the world's largest economy released its November inflation figures, which missed market's expectations, maybe not for much, but enough to put investors on guard ahead of Yellen& Co. Inflation in the US rose by a modest 0.4% in the month, while the core reading came in at 0.1%. Yearly CPI rose 2.2%, matching market's expectations and the previous figure, while the core figure that excludes volatile food and energy prices, resulted at 1.7% missing expectations of 1.8%.

The US Federal Reserve hiked rates as expected by 25 bps, and still foresees three rate hikes for 2018, with inflation being still the main drag. Policy makers are still  confident on growth but are cautious on the potential impact of the tax reform on it. The greenback fell afterward to fresh daily lows against all of its major rivals, but the EUR/USD pair was unable to regain the 1.1800 level, holding nearby anyway ahead of the Asian opening.

This Thursday, the macroeconomic calendar will be also a busy one, with preliminary December Markit PMIs, and the ECB monetary policy meeting. The central bank is largely expected to remain on hold, and will have little to add after its latest announcement of extending QE for a reduced amount. Later in the day, US retail sales  will add to market's volatility.

The pair is heading into the Asian opening at fresh weekly highs above 1.1800, having turned bullish according to technical readings in the 4 hours chart, the price advanced with a high volume candle above its 20 and 200 SMAs, although it pared gains a handful of pips below a flat 100 SMA. In the same chart, technical indicators have entered positive territory, but lost upward strength as the price consolidates near its daily highs, surely not a sign of upward exhaustion. The immediate resistance is 1.1835, a Fibonacci level, ahead of the 1.1870 price zone, were selling interest contained advances last week.

Support levels: 1.1800 1.1750 1.1710

Resistance levels: 1.1835 1.1870 1.1910

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