Daily Market Recap – EURUSD After the break of 1.15, what’s the target?

The dollar capitalized on Wednesday's rise to reach a 16-month high. The greenback is being supported by speculation that the Fed may have to raise interest rates sooner than expected after Wednesday's U.S. Consumer Price Index data showed prices rose at their fastest pace in more than three decades. The dollar further extended gains through the end of the week on increased safe-haven demand after the U.S. warned the European Union of a potential Russian invasion of Ukraine.

But it is mainly the difference in rate expectations in the two zones that explains the decline in the EURUSD pair. The divergence of central banks is weighing on EURUSD, with the Fed expected to tighten monetary policy well ahead of the ECB despite hawkish comments by ECB Governing Council member Holzmann that the ECB could end its asset purchase program as early as next September if inflation appears to have returned to the ECB's target on a sustainable basis. However, a gap remains with the US regarding the transition to a rate hike.

Interest rate futures appear to be too aggressive in their assessment of the European Central Bank's rate hikes for next year, as ECB policymakers are not changing their accommodative stance, leaving room for further euro weakness.

The euro has finally broken through support between 1.1500 and 1.1530 and is extending its downtrend below the descending oblique that has blocked all rebounds since June.

The break of the strong support at 1.1704 had validated a double top with a target at 1.1150. Similarly, the carryover of the last leg down on the recent break of 1.1500 gives the same level as the target. Now a horizontal support line is located at 1.1170.

 (Chart Source: Tradingview 14.11.2021)

We can therefore target 1.1170 as long as the bearish oblique is not crossed. However, it is possible that this level will not be reached in a straight line as it is quite far from the current levels.

Support & Resistance Levels:

R3       1.1704

R2       1.1640

R1       1.1530

S1        1.1355

S2        1.1264

S3        1.1170

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.