The single currency has been moving higher so far this week, supported by the weak dollar as investors bracing for Today’s Fed’s policy review. The dollar index fell below the 50MA for the first since mid-Oct but rebounded and closed above by the end of the day.

The euro traders experienced another week of weak economic data, growth concerns continued to impact, but the oversold technical levels supported the currency so far this week. EURUSD rose to 1.1400 which is our first target, a break out above Tuesday’s high needed to challenge last week’s high 1.1440.

Data review:

EA CPI printed below market expectations.
The euro area annual inflation rate was 1.9% in November 2018, down from 2.2% in October. A year earlier, the rate was 1.5%, according to Eurostat. The euro area flash estimate for November 2018, was 2.0%, according to Eurostat.

Tuesday’s headline data ifo Business Climate Index fell to 101.0 points in December from 102.00 points to November. However, the construction sector index remained at last month’s very high level.  Contractors assessed their current business situation slightly more favorably, but their expectations declined somewhat, according to CES ifo.

The other key sectors pointed lower; manufacturing the business climate index fell markedly, the service sector, the business climate deteriorated considerably, the index also edged downwards in the trade sector.

Based on the ifo Business Cycle (below chart), we forecast an optimistic view of the state of the Germany economy in 2019. Currently, the ifo Business Cycle Traffic Lights sitting in the regime of contraction, it could move to buffer zone in the next couple quarters in 2019, followed by expansion by the end of 2019 or early 2020.

TECHNICAL OVERVIEW

Since Monday we have noted earlier this week, Pivotal/double bottom at 1.1260 tested and held so far. As a result, the price action swings higher through the first resistance and met our first target 1.1390/1.1400. Over the past two days, the support level has moved higher to 1.1330 from 1.1300 followed by 1.1260. 

Now getting through Tuesday’s high could rally further to 1.1440 which is the key level to observe to forecast 1.1500.
The daily indicators are supporting higher prices, but we are cautious around 1.1440 levels.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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