EUR/USD analysis: Yellen, Trump, and FED's future up next

Valeria Bednarik FXStreet

EUR/USD Current price: 1.0557

The EUR/USD pair plummeted to 1.0530 last Friday, undermined by ECB'S decision to extend its facilities for nine months for €60billion per month, totaling extra €540 billion for 2017, against expectations of six months at €80 billion per month, which would have been €480 billion. Draghi's dovish tone and limited perspectives of growth for the upcoming year, once again highlighted the imbalances between the US and the EU economies. Adding to dollar's intraday strength, preliminary December US consumer confidence jumped to 98, the highest since January 2015, from 93.8 in November.

All eyes are now on the US Federal Reserve, which will meet this Wednesday, and is expected to raise the Fed funds target range by 25bp to 0.50%-0.75% from the current 0.25%-0.50%. The market has largely anticipated such move, and while it will likely benefit the greenback, focus will be on Yellen's speech, and any clue she may give on how fast the FED will move next year. Nevertheless, she will likely be cautious until Trump takes office and defines his administration's policies next January 20th.

Technically, the pair is poised to extend its decline according to the daily chart, given that on Friday, the price fell after failing so regain ground above a bearish 20 SMA, currently at 1.0630, while the RSI indicator has accelerated its slide, heading south around 39. The Momentum indicator in the mentioned chart is stuck around its mid-line, but it has corrected the extreme oversold conditions reached late November, leaving room for further slides. Shorter term, the bearish momentum remains strong, as the pair is currently developing below all of its moving averages, with the 20 SMA gaining downward strength around 1.0675, whilst the Momentum indicator heads strongly lower near oversold readings, and the RSI indicator consolidates around 35.

Support levels: 1.0540 1.0500 1.0460

Resistance levels: 1.0590 1.0630 1.0675

View Live Chart for the EUR/USD

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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