EUR/USD. December 3. Market focus on Christine Lagarde’s “fundamental valuation” and Donald Trump’s duties

By | December 3, 2019

Relevance up to 02:00 2019-12-04 UTC–8



On December 3, the EUR/USD pair performed consolidation over the correction levels of 38.2% (1.1057) and 23.6% (1.1029) on the new grid of Fibo levels and performed an increase to the Fibo level of 50.0% (1.1080). Also, the closure was performed over the downward trend corridor, which is no longer working. Based on this, I expect the euro-dollar pair to continue to grow in the coming days, although there are also enough factors in favor of the opposite scenario. For the most part, they are economic. At the same time, it is impossible to deny the ability of the euro currency to grow by 100-200 points.

Yesterday had quite a rich background of information. Two key events of the day could and caused a change in the balance of supply and demand for the EUR/USD currency pair. Demand for the euro has grown thanks to the actions of Donald Trump, as well as economic reports on business activity in the European Union and America. It is easy to guess that these events were negative for the US dollar, although the actions of the US president can be interpreted in different ways. I would like to note at once that earlier when Donald Trump imposed duties on imports from China or Turkey, the dollar did not always respond with a fall against European currencies. Thus, yesterday’s growth of the euro cannot be unambiguously linked with the introduction of duties on imports of steel and aluminum from Argentina and Brazil by the American President. It is also impossible to say unequivocally that the criticism of Jerome Powell caused the fall of the US currency. Trump once again said that the Fed does not help the American economy and farmers, but only harms them and urged to lower rates as quickly as possible. We cannot even conclude that the economic reports have caused such a reaction of traders because although business activity in the manufacturing sector of the eurozone has grown, it remained in the “red zone”. The US ISM business activity report could not cause the US dollar to collapse on all fronts. To top it all off, you can try to link the decline of the US currency with the speech of Christine Lagarde, but after studying her speech in detail, it becomes clear that it is not the cause of the fall of the US currency. The European Central Bank is preparing for a new reduction in interest rates or the use of other measures to stimulate the EU economy. The ECB chairman said that the growth rate of the EU economy remains low, and all monetary policy will undergo a serious “fundamental” assessment and, as a result, may undergo major changes. Thus, Christine Lagarde’s rhetoric is more of a “bearish factor” for the euro than a “bullish” one.

Based on all this, it becomes clear that the European currency did not have any special growth factors yesterday, at least the factors of such strong growth. But last week, when the EUR/USD pair could show a significant rise or fall more than once, nothing happened. And the general conclusion, therefore, is this: the correlation between the actions of traders and the information background now remains not high; this explains the complete lack of movement of the pair last week and the strong growth on the first day of this week.

Forecast for EUR/USD and trading recommendations:

On December 3, traders continue the process of growth of the pair. Demand for the euro currency increased significantly on the first day of the week, and the activity of traders increased. So, I recommend buying the pair today with target levels of 61.8% (1.1104) and 76.4% (1.1133). The pair’s rebound from the Fibo level of 50.0% (1.1080) may work in favor of the US dollar and the beginning of the fall in the direction of the level of 23.6% (1.1030). However, I do not recommend selling the pair after leaving the trend range.

The Fibo grid is based on the extremes of October 21, 2019, and November 29, 2019.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

Performed by Samir Klishi,
Analytical expert
InstaForex Group © 2007-2019

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