Euro at lofty levels ahead of ECB meeting and EU Summit EURUSD DXY

Euro at lofty levels ahead of ECB meeting and EU Summit: EUR/USD, DXY

The ECB meeting and the first day of the EU Summit are both on Thursday. The ECB has already signaled that they are willing to extend the Pandemic Emergency Purchase Program (PEPP) until as late as mid-2022 and increase bond buy by a possible 500 million Euros. They may even cut interest rates below the current minus 50bps! The EU will be trying to persuade Poland and Hungary to pull their vetoes to the seven-year budget, which includes 750 billion Euros for coronavirus aid. With the possibility of all this stimulus the, EUR/USD is still at its highest levels since April 2018! The reason, though, has more to due with the US Dollar than with the Euro.

EUR/USD

On December 1^st, EUR/USD broke higher out of a double bottom formation and about the September highs of 1.2014. The target for the breakout of a double bottom is the height of the pattern added to the breakout point, which is near 1.2400. However, the pair is stalling at the 78.6% Fibonacci retracement from the early 2018 highs to the March 23^rd lows, as well as the 127.2% Fibonacci extension from the September 1^st highs to the double bottom lows. This resistance is near 1.2122 and 1.2175. In addition, the RSI is in overbought territory, albeit moving lower at the cusp of neutral territory.

Source: Tradingview, City Index

EUR/USD longs may be interested in taking some profits off the table ahead of Thursdays events. First level of horizontal support is 1.2078. The next support level is the breakout of the double bottom formation, the upward sloping trendline from the November 4^th lows and the psychological 1.2000 level. The third level of support is horizontal support near 1.1922 Resistance is at recent highs near 1.2178 horizontal resistance from 2018 near 1.2260.

Source: Tradingview, City Index

DXY

The US Dollar Index (DXY) has been trading opposite the EUR/USD. With all the potential stimulus coming Europe’s way over the next few weeks, markets don’t seem to think its anything compared to what is coming to the US! The FOMC meets next week, although the Fed is likely to hold off on any kind of increase in stimulus until they see what the government is going to offer. However, whereas the EU is looking at a 750-billion-euro package, the US is look at a $1 trillion + fiscal package once Joe Biden takes over as President! This is the main reason the US Dollar has been so weak compared to the Euro.

The US Dollar Index has been trading lower since the highs in late March when the pandemic began. Price moved from near 103,00 on March 20^th down to 90.47 on December 4^th. The DXY has moved into a strong support zone between 89.00 and 91.00 and has stalled. The RSI on a daily timeframe is diverging from price, which indicates a possible reversal in price. Horizontal resistance is at 91.74 and then an upward sloping trendline from 2011 near 92.50.

Source: Tradingview, City Index

With the ECB meeting and EU Summit on Thursday, there is the potential for profit taking in the Euro. Watch for volatility in Euro pairs ahead of these events.

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.