Published on 16.12.2021 12:23

The Euro remained somewhat resilient in yesterday’s trading session against the US dollar which was surprising given the hawkish stance by the US Federal Reserve when they announced their latest interest rate decision followed by a monetary statement.

As widely expected by the market, the central bank left interest rates on hold but it was the following monetary statement that garnered the most attention and the Fed announced that it will accelerate an end to the central bank’s pandemic-era support of the US economy in a major shift that will also see up to 3 rate rises next year.

Immediately after the news the Euro took a tumble against the greenback but was able to finish the day in positive territory which may be attributed to comments made during the monetary statement by Fed Chair Jerome Powell who said that “the Omicron variant poses risks to the outlook”, of the US economy which means that although they intend to move ahead with rate hikes now, the situation could change if the virus continues to spread.

Looking forward today, the main drivers of the EUR/USD currency pair PMI data for the Eurozone, Germany and the US for December. The main focus however will be the latest interest rate decision from the European central bank followed by a monetary press conference and traders will be looking for clues on how the ECB plans to manage their Pandemic Emergency Purchase Program (PEPP) and Asset Purchase Program (APP) and if there will be a timing of a possible reduction.

On the chart we can see that the Euro has a strong barrier to overcome at $1.1342 which it has been unable to do so for more than a month and it is also facing another hurdle which is the bottom line of the downward channel that was formed somewhere around the beginning of June.

Unless the ECB changes from dovish to bullish with regards to their attitude on reducing their Covid induced stimulus program it is hard to see a break of these strong resistance levels by the end of the week and the currency is likely to drift lower.


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