Which does not kill makes us stronger. The week to December 14th was a real challenge for the US dollar. Bloomberg experts predicted a slowdown in US inflation, Mario Draghi expected optimism about the prospects for the European economy, and a truce in the Washington-Beijing trade war should have a positive impact on European business activity. In fact, only the first of all the negatives worked. Consumer price growth rates really declined in November, however, producer prices extended a helping hand to the USD index. A pair of EUR / USD rolled on a roller coaster, and then went below the base of the 13th figure.
The European Central Bank, as promised, completed the € 2.6 trillion program of quantitative easing, but Mario Draghi said that the balance of risks was shifted to the downside, which was a catalyst for sales of the euro. Markets closely monitor every word of the heads of regulators. Prior to this, Jerome Powell's phrase about the proximity of the current values of the federal funds rate to the neutral level was a sentence to the dollar; at the end of the second week of December, his rival was stunned by the head of the ECB. If earlier he spoke about balanced risks, now about downward risks. This was enough to trigger a wave of sales of EUR / USD.
Furthermore. Instead of growing against the background of a truce between the US and China, European business activity, by contrast, continued to peak, which, in no small measure, contributed to the events in France.
Dynamics of European business activity
If the market does not go in the direction where it is expected to be seen, then it is more likely to go in the opposite direction. In this regard, the week to December 14 may be a sign for the main currency pair. Releases of data on US inflation and European business activity, paired with the meeting of the ECB did not lead to its growth. Perhaps the idea of selling US dollars amid a slowdown in the cycle of normalizing the monetary policy of the Fed is not worth a damn? We will get the answer on December 19, when the results of the last 2018 FOMC meeting will be announced. Investors are counting on an increase in the federal funds rate to 2.5% and a decrease in estimates of its future values. In September, the central bank planned to tighten monetary policy three times in 2019, however, it is likely that it will reduce the number of acts of monetary restriction to two.
Technically, on the daily EUR / USD chart, there is a transformation of the Shark pattern at 5-0. Reversing to the level of 38.2% of the CD wave allowed us to form short positions. A pair of quotes outside the lower limit of the 1.1265-1.1465 trading range will strengthen the risks of restoring the medium-term downtrend.
EUR / USD, the daily chart
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