EUR/USD analysis: odds for a US rate hike firmly higher post-Yellen

Valeria Bednarik FXStreet

EUR/USD Current price: 1.1808

The greenback ended the day with solid gains against most of its major rivals, partially bolstered by risk aversion at the beginning of the day, later on demand amid high-yielding rivals' weakness. The common currency was unable to lift its head after the outcome of the German election, with local investors resuming selling after London's opening. The EUR/USD pair fell down to 1.1757, its lowest since August 23rd, accelerating south on the technical breakout of the 1.1820/30, which contained declines since late August. In the news, the Euro zone had little to offer beyond the German's August import price index, which was a modest disappointment, flat monthly basis. In the US, on the other hand, there were multiple Fed speakers hitting the wires, including head's Yellen.

Chances of a rate hike increased after she reiterated that low inflation is probably due to transitory factors, while adding that keeping rates on-hold until inflation reaches 2% could be "imprudent. New home sales fell in August, down by 3.4%, against a 3.3% advance expected, whilst the Richmond Fed manufacturing index for September soared to 19 from previous 14. Market players chose to ignore the negative housing data, keeping the greenback bid at the end of the day.

The EUR/USD pair has shed almost 200 pips since the week started, leaving intraday technical readings within oversold territory, but by no means suggesting an upcoming reversal. Now bouncing from the mentioned low, the pair remains well below the daily ascendant trend line coming from mid August broken on Monday, while in the 4 hours chart, the 20 SMA has already crossed below the 100 SMA and points to do the same with the 200 SMA, this last in the 1.1890 region, reflecting the strong selling momentum that would likely extend over the upcoming sessions, as long as selling interest contains upward corrections in the 1.1820/30 region. Further declines will expose 1.1661, August monthly low.

Support levels: 1.1760 1.1730 1.1695

Resistance levels: 1.1825 1.1850 1.1890

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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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