What to be, not to be avoided. The Fed recognized the need to gradually slow down the process of normalizing monetary policy. FOMC members are planning to raise the federal funds rate once or twice in 2019, rather than three, as in September forecasts. The Central Bank believes that the US economy will slow down from 3% to 2.3% in 2019. If GDP and stock indices peaked, then what's the point of holding on to the dollar? Is it time to sell it? After a pause, speculators answered this question positively, which allowed EUR / USD to soar to the top of the 14th figure. However, not for long.
If the favorite shows signs of weakness, then this does not mean that it is ready to throw the white flag. His opponent, if, of course, he wants to win, must present his trump cards, and the euro, at first glance, has few of them. GDP and business activity are growing at the slowest pace since 2014, and core inflation has frozen at around 1%. It is unlikely that the ECB in such conditions will want to normalize monetary policy. However, in order to understand where the eurozone economy will move, you need to understand the reasons for its sluggish state. These include trade wars, the problems of the German auto industry and the unfavorable political landscape.
It is believed that the conflict between the United States and China is most harmful for export-oriented economies. Due to a decrease in external demand, they suffer the most. In this regard, the eurozone, with its export share in GDP reaching 40%, is in an extremely disadvantageous position compared to the United States. The indicator for the latter does not reach 20%. At the same time, the autumn statistics on foreign trade of the currency bloc shows that, in fact, not everything is as bad as it may seem at first glance.
Dynamics of European exports
From a political point of view, there are two hot spots on the map of the Old World, Italy and Britain. Rome, after much deliberation, decided that lowering the cost of borrowing was more important for him than fulfilling election promises. Indeed, the republic needs to attract decent money from abroad, and with a high yield of Italian bonds, it will have to pay a lot for resources. As a result, Eurosceptics decided to reduce the size of the budget deficit from 2.4% to 2% of GDP, which favorably affected the rates of the local debt market.
Of course, there are a lot of dark spots, including Brexit, the ability of Germany's automobile industry to recover, as well as the course of negotiations between Washington and Beijing, but most importantly, the euro has reasons for optimism. It is supported by the acceleration of average wages against the background of improving the state of the eurozone labor market. If inflation starts to please the ECB, the Central Bank will have arguments for starting monetary policy normalization, and this is a completely different story.
Technically, the combination of the "Three Indians" and "Splash and Regiment" patterns on the 1-2-3 base, if successfully overcome the resistance by 1.1465, could lead to a reversal of the downward trend and to the implementation of target by 88.6% for the Shark. Since the bulls failed to consolidate above an important level, the likelihood of further consolidation increases.
EUR / USD, the daily chart
