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US dollar strengthens ahead of central bank meetings


TOPICS COVERED IN THIS ANALYSIS OF THE EUR / USD PAIR

  • Markets hanging from the lips of Jerome Powell and Christine Lagarde
  • EUR/USD : a consolidation in a pennant

Markets hanging from the lips of Jerome Powell and Christine Lagarde

the US dollar strengthens against the euro on Monday despite a market hesitating before that Central banks did hold their last meeting of the year, including the Fed and the ECB.

The US Federal Reserve on Wednesday and the European Central Bank on Thursday will particularly attract the attention of investors. In recent weeks, the Fed has become more openly concerned about inflation, and the market expects its faster asset buyback program to be curtailed.

Investors have already largely digested the probable inflection that the institution is preparing to give to its monetary policy, with a possible acceleration in the withdrawal of purchases of financial assets, before one or more rate hikes.

On the ECB side, officials have repeatedly announcement that purchases of pandemic emergency program (PEPP) assets would stop as planned from the second quarter of 2022. In contrast, President Christine Lagarde reiterated that she considers it very improbablea rate hike in 2022.

EUR / USD: a consolidation in a flag

Graphically, the EUR / USD has been moving in a bearish momentum since June 2020. The Fed’s tightening of monetary policy is boosting the greenback. The strength of the dollar can also be explained by market expectations for a rate hike.

As a result, the euro remains under pressure and fails to gain momentum. On the contrary, everything suggests that the single currency consolidates in a figure of continuation of trend: a pennant.

This phase of stabilization in a triangle since the end of November suggests a new lower leg to come. For now, prices are trying to preserve support at $ 1.1270, however a foray below $ 1.1250 would reinforce this bearish scenario. The pair could therefore accentuate its tumble and return to the support at $ 1.1180. Finally, a breakout of this threshold would propel the euro to the next level at $ 1.1075.

EUR / USD CHART IN DATA JOURNALSISRES

Twitter @Joris Zanna

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