The Fed is about to show signs of accelerating the tapering process, but investors should see how the market pricing remains aggressive. On the other hand, the ECB might move slowly while the Chinese authorities are becoming worried about economic growth.
Christmas is merely two weeks away, and there is no sign of holidays effect in the market. The economic calendar is also eventful where the Fed, the ECB and the BoE will meet this week. However, investors might consider the Fed’s meeting as nothing special. Powell already signalled the possibility of tapering where the current investors anticipate that the Fed will raise the rate soon. Therefore, this week's meeting should be exciting where the correction in the US Dollar due to upcoming holiday sessions is likely to happen.
In the previous hiking cycle, the Fed raised the rate by 225bp, where the excessive inflation pressure was not the primary concern. The market was pricing at the start of the cycle that we have seen already for the current session. Investors should monitor how the US inflation pressure puts pressure on the Fed to hike more and faster than expected. Even if the Fed puts an upside pressure on longer yields, it has reached the resistance area and is set to flatten further.
Meanwhile, in the Eurozone, the ECB’s Governing Council is divided into hawks concerned about inflation pressure. However, based on current analysts’ projections, the ECB’s rate hike might remain distant, which is not next year's concern. If we see the Fed outpace the ECB in its tightening policies, there would be more downside pressure in the EURUSD.
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Forex Technical Outlook for 13 December 2021 to 17 December 2021
This week is full of economic events, and it is likely to work as the eventful last week before the Holiday season. After the US CPI, investors will grab attention from the PPI and Retail Sales Number. Moreover, the AUD job numbers, CAD CPI, and NZD GDP will add liquidity to the market. Some volatility is yet to come from FOMC and ECB press conferences and SNB and BoE meet.
The US Dollar index is under pressure as the price reached the 96.92 key resistance level and cannot move above it. The price remained corrective between 96.98 to 95.50 area where a break below the 96.60 level with a bearish daily close has a higher possibility of showing correction in the US Dollar.
EUR/USD bears are under pressure as the price is highly corrective above the 1.1200 key support level. Although the broader market direction is bearish, the recent price action shows excellent lower higher formation while the price remained below the dynamic 20 EMA.
The above image shows how the MACD showed PNP formation where the MACD line moves up with a lot of space upside down. Although the price faced resistance from the dynamic 20 EMA, it formed an inside bar, signifying that bears are less interested in these zones. Therefore, based on the daily context, a break above the 1.1375 with a bullish daily close would be a primary sign that the price wants to test the 1.1600 key supply level. In that case, any buying opportunity from dynamic support would be profitable. On the other hand, a break below the 1.1266 swing low would resume the current selling pressure towards the 1.1000 level.
GBP/USD shows a strong bullish sign by breaking above the falling wedge pattern with a bullish daily close. Moreover, the divergence with the MACD Histogram is also a sign that bulls are building orders in these zones that may explode the price.
The above image shows how the MACD Histogram formed lower highs and moved to zero while the price remained bearish with extreme volatility. Moreover, the falling wedge breakout with daily candles signifies buyers present at the current price area.
Investors should wait for the price to move above the intraday swing high with a bullish break of the structure before finding the price at a suitable buying area. As per the current price action, any bullish rejection from 1.3200 to 1.3250 would be a decent buying opportunity in this pair with the target of 1.3500 area. The 1.3180 level would work as an invalidation level, where a break below this level would increase the selling pressure.
As per the last week’s projection, AUD/USD showed a remarkable recovery as the price found a bottom at the 0.7000 key support level. However, the current price faces a dynamic resistance from the 20 EMA besides the static 0.7175 level. Therefore, investors should closely monitor how the price reacts at this level to define the future price direction.
The above image shows that the MACD Histogram turned bullish while the MACD line aimed higher. Therefore, the V-shape recovery from the critical support level with a bullish daily close above the 0.7175 level would increase the buying pressure towards the 0.7400 area. On the other hand, any rejection from the dynamic 20 EMA with a bearish daily close below the 0.7120 would alter the current market structure and lower the price towards the 0.7000 area.
USD/JPY bears are active in the daily chart as the price remained below the dynamic 20 EMA after a strong bearish breakout. Moreover, the current price is trading below the 113.84 event level from where multiple rejections with a bearish daily candle below the 113.20 level would increase the selling pressure in the coming days.
The above image represents the divergence between the price and MACD lines, where the Histogram shows a unique NPN formation. Therefore, if any bearish daily candle appears below the 113.20 level, the price is likely to break the 112.70 support level with the target of 111.00 level.
XAU/USD is trading above the 1768.00 support level with a lot of volatility. Moreover, the dynamic 20 EMA is approaching the current price range, where any bullish breakout would open buying opportunities towards the 1813.68 resistance level.
The MACD Histogram squeezes to the zero level where the MACD line is flat in the above image. Therefore, based on the daily price structure, a bullish breakout above the dynamic 20 EMA is required to rely on the possible buying opportunity in this pair. On the other hand, a break below the 1768.00 level with a bearish daily close would lower the price towards the 1724.00 area.
The BTC/USD price is under pressure as the current massive sell candle breaks the price below the 53,522.00 static level with a bearish sentiment. Any corrective bullish pressure would be a selling opportunity in this pair towards the 40,632.62 support area.
The gap between the price and dynamic 20 EMA extended the possibility of a bullish correction in this pair. However, the selling opportunity in this pair is valid as long as the price trades below the 53,522.00 level.
Overall, this week is full of essential releases and central banks meetings. Therefore, investors should monitor how the ECB, the Fed, and BoE express their opinion over the economy. A hawkish tone for the Fed regarding the rate hike has a higher possibility of making the US Dollar stronger against other major currencies.