EUR/USD is trading above the separator line of 1.1070 and already reached 1.1089. Is it getting ahead of itself providing a sell opportunity?
There is only one reason for the rise and it seems to lack legs. Here is what’s going on.
Hansson’s comments
The euro was hit hard by Draghi’s words, which provided thick hints for cutting rates and augmenting QE in December. While some of his colleagues such as Peter Praet repeated this stance, we heard a totally different tune from the Estonian member Ardo Hansson.
Hanson told the Wall Street Journal:
At the moment there is no need for the European Central Bank to announce further stimulus measures at its next meeting in December
His comments were repeated over and over again. However, it seems that the market got carried away. Hansson does not seem to represent the majority within the ECB and especially does not side with Draghi, which has more authority than it used to have in his early days.
FOMC Meeting
The Federal Reserve is not expected to raise rates today: no new data supporting a hike has come to light. In addition, there is no press conference nor new forecasts. The focus is on the statement.
Since we had mostly negative data since the last meeting in September,. the Fed is expected to acknowledge the weakness. Some even predict Yellen and co. to signal no hike in 2015. That would be really bad for the US dollar.
But why would they?
There is so much data coming up until their December 16th meeting, so why close the door on expectations?
In addition, Janet Yellen testifies early in December, and she could use this public appearance to signal the next move. Why do it now?
Therefore, there is a good chance that the Fed will only marginally change its wording about the economy but still leave the door open to a rate hike in December at this point. And such a move would be dollar positive.
And even if the chances for a rate hike in the US are lower, Draghi has shown us that the ECB is far far more dovish than the FED, no matter how you look at it.
EUR/USD
Support clearly appears at 1.10, followed by 1.0950. Much stronger support awaits at 1.0810, which was the post-recovery low.
On the upside, immediate resistance is at 1.1130, followed by 1.1290. Here is the chart:
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