Everything is going against the US dollar, and the latest blow from retail sales was very significant. The doubts that Jeffery Lacker cast regarding his vote in October, being the sole voter for a hike in September certainly help the depressed dollar. Also the Beige Book, which is usually not a very colorful event, also hit the greenback. Against the euro, this accelerate the pair’s rise.
EUR/USD climbed but with a lot of caution as it approaches the very critical line of 1.1460. Here is why this line is critical and the levels to watch.
Why is 1.1460 important?
- 1.1460 was the high level that the pair reached in May, after recovering from the abyss of near parity earlier.
- 1.1460 is exactly 1000 pips above the lowest level in 12 years: 1.0460 seen back in March.
- 1.1460 was reached once again in mid September, after the Federal Reserve decided not to hike.
Break or bounce? This is a good question. The pair already broke uptrend resistance.
Fed December hike fading away – 7 developments
At the time of writing, the pair has reached a high of 1.1463 a move which still cannot be labelled as an outright break.
The levels above are 1.15, 1.1560 and the August swing high of 1.1712. On the downside we have 1.1375, 1.1290 and 1.1215.
In the not-so-distant past, EUR/USD has been known for false breaks: the pair made a move that seemed convincing at first just to turn back immediately afterwards. The best example is the shoot higher in August, all the way to 1.1712.
Also the break of downtrend resistance seen earlier this month, was at first a false one, and the real one came only afterwards.
The latest news from the Fed leaned to the dovish side, with growing doubts over the chances of a move in December. The bond market prices in a chance of 65% against a hike, which is in stark contrast to what economists expect: 65% chance of a hike.
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