Upper Linear Regression Channel - downtrend Lower
Linear Regression Channel - downtrend
Moving average (20-day period, smoothed) - sideways movement
The euro/dollar pair was traded coolly on Friday and Monday. So, they were calm days in the market. Friday saw the release of perhaps the most important macroeconomic data in the United States, and traders had a right to expect stronger movements. However, the reports turned out to be mixed. Nonfarm Payrolls came worse than expected. Meanwhile, unemployment and the ISM Services PMI beat economists' forecasts. In other words, the disappointing NFP report was offset by strong results in unemployment and business activity. In this light, markets did not know how to react. Anyway, Nonfarm Payrolls were the most important data published on Friday. The actual results came 2.5 times lower than the market had expected, which is a negative factor for the greenback. At the same time, it can be assumed that the jobs market is now giving way to inflation. Indeed, the unemployment report reveals that the jobs market is approaching its pre-pandemic levels. This means that Nonfarm Payrolls will continue to show modest growth. Consequently, the jobs market will no longer be the Federal Reserve's top priority as it is recovering well. Meanwhile, rising inflation starts to spook investors. In November, consumer prices are projected to accelerate to 6.7%-6.9% y/y. Therefore, the US Federal Reserve may well base its policy decision on inflation rather than on the state of the jobs market. The higher the inflation, the more likely the further monetary tightening. At this stage, tightening will be reflected in the acceleration of the winddown of the QE program. In other words, if inflation rises from a month before, the greenback will strengthen. Given that consumer prices are forecast to soar, markets may well start buying the dollar in advance.
In terms of the technical picture, the quote has fallen to the moving average and is now traded slightly below it. The downtrend has resumed. As a result, the dollar is now rising against the euro. This week is not going to be eventful in terms of the macroeconomic calendar. The eurozone will present its ZEW Economic Sentiment Index, not the most important report, and the 3rd estimate of Q3 GDP (forecast: 2.2% q/q, in line with the 2nd estimate). ECB President Christine Lagarde will deliver a speech this week. The market is likely to show no reaction to her statements as she usually speaks 2-3 times a week and rarely says something investors have not already heard. Anyway, it is important to expect the pair to reverse sharply and volatility to increase when she speaks. However, it mostly never happens. The ECB's monetary policy meeting, the last one this year, will soon take place. Therefore, Lagarde is likely to once again repeat what she has already told: the economy is too weak, no rate hikes next year, as soon as the ECB's PEPP ends, the APP will be expanded. Therefore, is the Federal Reserve is likely to wind down the QE program by April, the ECB may well maintain it throughout 2022.
On December 7, EUR/USD volatility totals 74 pips. Today, the pair is expected to be in the range of 1.1207 and 1.1355. Heiken Ashi's reversal is likely to indicate a possible resumption of the uptrend.
Closest support levels S1 – 1.1230 S2 – 1.1169 S3 – 1.1108
Closest resistance levels R1 – 1.1292 R2 – 1.1353 R3 – 1.1414
EUR/USD consolidated below the MA. Short positions could be opened until the price consolidates above the MA with targets at 1.1230 and 1.1207. Long positions could be considered in case of consolidation above the MA with targets at 1.1353 and 1.1357.
