Article by ForexTime

The EUR/USD edged out a 12-day peak of 1.0992, with the euro maintaining its pre-Christmas bid in Monday’s ultra-thin markets. Resistance is marked at 1.1046 and 1.1060, which coincides with the 200- and 100-day moving averages. The Dec-7 low at 1.0796 is a key level on the downside. The dollar is currently registering over a 3.5% decline versus the euro on the month so far, which looks set to be the first month of net declines the U.S. currency has seen against the shared currency since April. This is in large part testament to the Fed’s measured guidance following the long-awaited rate lift-off last week.

The fate of the currency pair will be directly tied to the aggressiveness of the Fed in 2016 which has created mixed views in the market about the dollar’s fate in 2016. There is a growing view is that EUR/USD may rally, on net, during the year ahead following the steep, near 25% decline seen since May 2014. The Eurozone economy has been showing signs of recovery, while markets are already pricing in two 25 basis point Fed hikes for 2016. The Fed on the other hand has its dot plots labeled for four 25-basis point rate hikes throughout 2016.

Momentum on the currency pair is positive as the MACD (moving average convergence divergence) index prints in the red with an upward sloping trajectory that points to a higher exchange rate for the ERU/USD.

Article by ForexTime

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