As a result, the long-term sentence to the euro has finally been pronounced: euro zone clearly needs a QE program to beat the dangerous deflationary pressure. This is a long-playing euro-bearish factor.
However, in the near term the bullish EUR/USD correction could extend further. Break above the 1.2500 mark would open the way to 1.2600 and then – to the 1.2900 resistance area. We expect the sharp decline with the targets far below the 1.2000 mark to resume from here.
The bullish EUR/USD scenario will be viable only if the US Fed maintains a neutral stance on the next week’s meeting. You should also note that the European banks will be paying back part of the LTRO loans next week. On the one hand, this is a sign of the banking sector’s health. On the other hand, the balance sheet reduction will only add pressure on the ECB to announce more stimulus in January.
As for the euro zone’s economic calendar, watch the December PMI and ZEW economic activity indices on Tuesday: forecasts are upbeat. On Thursday pay attention to the German Ifo Business Climate.
Recommended Content
Editors’ Picks
EUR/USD retreats to 1.0700 after US data
EUR/USD lost its traction and turned negative on the day near 1.0700 in the American session on Tuesday. The data from the US showed that Employment Cost Index rose more than expected in Q1 and provided a boost to the USD.
GBP/USD declines toward 1.2500 on renewed USD strength
GBP/USD turned south and dropped toward 1.2500 in the second half of the day. The US Dollar gathers strength following the strong wage inflation data, forcing the pair to stay on the back foot.
Gold extends daily slide toward $2,300 after US data
Gold stays under bearish pressure and declines toward $2,300 on Tuesday. The benchmark 10-year US Treasury bond yield stays in positive territory above 4.6% after US Employment Cost Index data, weighing on XAU/USD.
XRP hovers above $0.51 as Ripple motion to strike new expert materials receives SEC response
Ripple (XRP) trades broadly sideways on Tuesday after closing above $0.51 on Monday as the payment firm’s legal battle against the US Securities and Exchange Commission (SEC) persists.
Eurozone inflation stable as the outlook on prices gets increasingly muddied
Eurozone headline inflation remains stable at 2.4%. With higher energy prices and improving domestic demand, questions about the direction of inflation become louder.