EUR/USD Holds Strong Against ECB Test: Market Outlook by ING and Forex Experts

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Key Takeaways:

  • 💪 EUR/USD showed resilience post-ECB event
  • 📉 Expectations of downward trend for eurozone interest rates
  • 🇮🇹🇩🇪 Italian:German spread widening attributed to profit-taking
  • 🧐 Current bond spread movement not indicative of ECB concerns
  • 💵 Market looking ahead to FOMC meeting next Wednesday
  • 🔮 Short positions in EUR/USD expected to be maintained
  • 🔄 Short-term trading range projected between 1.0450 and 1.0550
  • 🇨🇭 SNB implements 50 basis point rate cut, SNB President open to negative rates if necessary
  • 📉 EUR/CHF pair expected to trend downward, but not as deeply as ECB’s rate cuts
  • 💱 The main focus will be on the Fed meeting on December 18th, with a high expectation of a quarter-point interest rate cut.
  • 📊 The Dollar Index’s reaction is limited to the 34-day average, supporting a positive trend outlook between 105-108.
  • 📉 For EURUSD, a negative trend may continue towards levels like 1.0440, 1.0390, and 1.0360 due to strong DXY conditions.
  • 📈 Key levels for the day are 1.0545 and 1.0440.
  • 💰 The US dollar is holding onto gains due to firm US inflation data
  • 🐻 EUR/USD bears survived the ECB test with Lagarde not being as dovish as expected
  • 📈 US inflation data this week was firmer than expected, with little re-pricing of the Fed cycle
  • 🧐 Dollar bulls are enjoying a lack of seasonal weakness so far in December
  • 💱 EUR/USD remains around 1.05 mark without significant movement
  • 🇨🇭 The SNB made an aggressive rate cut, signaling a willingness to use negative rates if needed
  • 🇨🇿 The CNB blackout period has started, with a potential pause in the cutting cycle expected in December
  • 📉 Market impact of ECB meeting in Poland and Czech Republic with possible rate differential changes

Market Insights:

The recent developments in the foreign exchange market have highlighted key trends and events that are shaping the direction of major currency pairs. Here are some insights to consider:

Resilient Euro:

  • Despite expectations of a downward trend in eurozone interest rates, EUR/USD has shown resilience post-ECB event.
  • The profit-taking that widened the Italian:German bond spread may not be a direct reflection of ECB concerns, as the market is focused on the upcoming FOMC meeting.

USD Strength:

  • The US dollar has been holding onto gains backed by firm US inflation data, with little re-pricing of the Fed cycle.
  • Dollar bulls are benefiting from a lack of seasonal weakness in December, supporting a positive trend outlook for the Dollar Index.

Central Bank Actions:

  • The SNB’s aggressive rate cut and openness to negative rates if necessary have impacted the EUR/CHF pair’s expected downward trend.
  • The CNB’s blackout period and potential pause in the cutting cycle could also influence market dynamics in the coming days.

Short-Term Outlook:

  • Short positions in EUR/USD are expected to be maintained, with a short-term trading range projected between 1.0450 and 1.0550.
  • ING’s prediction of a downward trend in the EUR/CHF pair adds to the uncertainty in the market post-ECB meeting.

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