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EUR/USD. December 12. Results of the day. Eurozone economic reports disappointed. ECB left rates unchanged

4-hour timeframe

analytics5df2d1e0bd0e6.png

Amplitude of the last 5 days (high-low): 31p - 70p - 25p - 35p - 75p.

Average volatility over the past 5 days: 48p (average).

The EUR/USD currency pair began a downward movement on Thursday, December 12, which, from our point of view, suggested itself yesterday. To begin with, we still consider the Federal Reserve meeting absolutely neutral. All of Jerome Powell's statements were completely mundane. Even his words about the possible redemption of short-term assets, "if necessary," should not be regarded as hints of concrete actions in the near future. A small decrease in GDP forecasts for 2019-2022 could also not cause a fall in the US currency. Moreover, we would like to immediately note that the main fall of the US dollar has already happened at night, that is, during the Asian trading session. US traders and investors, and European, thus did not work out the Fed meeting and its results by selling the dollar. And if we recall the publication of the November inflation report in the United States, which grew to 2.1% YOY, and the fact that the Fed does not plan any new easing of monetary policy in the coming months or even years, it becomes clear that fundamentally, there was much more reason to strengthen the US dollar than for it to fall. However, the drop did not happen, which again forces us to pay attention to the paradoxical situation in which there are certain reasons for the euro/dollar pair to decline, but they are not sufficient for the bears to resume sales near two-year lows.

The fundamental background for the euro/dollar pair has not changed at all today. We remind you that we continue to regard the economic news and reports from the European Union as weak, and the US data as strong. Thus, the fundamental background for the EUR/USD pair remains unambiguously on the side of the US currency. Today, inflation was first published in Germany in November, which remained at the level of the previous month and amounted to + 1.1% YOY. On the one hand, such a CPI value may seem quite good, but we recall that the German economy is the locomotive for the EU, so inflation in other EU countries is even weaker, and the pan-European one, according to recent data, does not exceed 1.0% YOY . A little later, a report was published on industrial production in the European Union for October, where it was absolutely expected that a drop of 2.2% YOY and 0.5% MOM was recorded, which almost perfectly coincides with the forecast values. And what is the result of today? The next two quite important reports from the EU were disappointing, and the euro currency in began a downward correction.

The results of the ECB meeting, which traders already expected, took place. Both key interest rates, deposit and credit, remained unchanged, -0.5% and 0.0% respectively. In principle, none of the market participants expected the easing of monetary policy even more at the first meeting of the ECB under the leadership of Christine Lagarde. At a press conference, the head of the ECB said that the risks of a slowdown in the EU economy are becoming less pronounced. In addition, Lagarde again called on the governments of the EU member states to provide more stimulus to their own economies. Such rhetoric by Christine Lagarde also completely falls under the definition of "neutral." Based on this, the euro did not receive any reason to strengthen on the penultimate trading day of the week. You can also pay attention to the ECB forecasts for GDP and inflation for the next few years. According to the regulator, GDP in 2019 will grow by 1.2%, and in the next - by 1.1%. Inflation should accelerate to 1.6% YOY only by 2022. From our point of view, it is precisely such forecasts of the main indicators that are the most important today. They mean, in fact, that the ECB is not expecting dramatic improvements in the economic situation in the coming months. That is, the quantitative incentive program will continue to operate for 20 billion euros per month, and rates will remain "ultra-low" for a long time. Moreover, we would like to draw attention to the fact that acceleration of the EU economic growth rate is not expected, but their slowdown is quite possible. The reasons for the negative scenario may be the escalation of trade conflicts in the world, as well as inciting new ones. As a result, a slowdown in the global economy and a similar decline in the economy of each individual country. Based on this, we still believe that it will be extremely difficult for the euro to form an upward trend in the long term.

From a technical point of view, a downward correction against an upward trend has begun for the EUR/USD pair. The upward trend itself remains extremely weak, but the euro is still creeping up, often ignoring macroeconomic reports, which should supposedly support the dollar. Volatility has grown to 48 points in recent days, but this is still not a high enough indicator. Given all the factors, we are still waiting for the resumption of the downward trend.

Trading recommendations:

EUR/USD began a new round of correction. Thus, long positions formally remain relevant with the goal of a second resistance level of 1.1173, but after the completion of the current correction. But overcoming the critical Kijun-sen line may just provoke the resumption of the downward trend with the first goals of 1.1080 and Senkou Span B.

Explanation of the illustration:

Ichimoku indicator:

Tenkan-sen is the red line.

Kijun-sen is the blue line.

Senkou Span A - light brown dotted line.

Senkou Span B - light purple dashed line.

Chikou Span - green line.

Bollinger Bands Indicator:

3 yellow lines.

MACD indicator:

Red line and bar graph with white bars in the indicator window.

Support / Resistance Classic Levels:

Red and gray dotted lines with price symbols.

Pivot Level:

Yellow solid line.

Volatility Support / Resistance Levels:

Gray dotted lines without price designations.

Possible price movement options:

Red and green arrows.

The material has been provided by InstaForex Company - www.instaforex.com