FXS: Euro Holds Steady As It Tests the 100−Day SMA For Support
U.S. dollar price action was mixed throughout the North American trade, with most of the major currencies holding a narrow range during the day, and the greenback may continue to face choppy price action going into Friday as market liquidity thins ahead of the weekend. As European policy makers continue to talk down fears surrounding the debt crisis, the rebound in risk appetite could bear down on the reserve currency, but the rise in market sentiment is likely to be short-lived as market participants speculate the EU to expand the European Financial Stability Facility.
The Dollar Index edged lower after rising to 80.00 for the first time since September, and the recent rally in the greenback may gather pace in December as the uncertainties surrounding the global economic outlook weighs on market sentiment. Indeed, we saw the EUR/USD bounce back from the 100-Day moving average (1.3303) to hold within the previous day’s range, and the exchange rate may continue to trend sideways going into the end of the week as it continues to search for support. At the same time, the USD/CHF advanced to parity for the first time since September, and the exchange rate may continue to push higher in the days ahead as it breaks out of the narrow range that was carried over from the previous week. As the economic docket for Friday remains fairly light, we should see risk trends dictate price action going into the Asian trade, but the drop in liquidity is likely to produce difficult trading conditions given the shortened U.S. trading session scheduled for tomorrow.
Euro Holds Steady As It Tests the 100-Day SMA For Support
The Euro appears to be carving a bottom around the 100-Day SMA as European leaders talk down the risks for the region, but the current price development could turn out to be a short-term consolidation rather than a reversal as the risks for contagion continues to weigh on the economic outlook. As the EUR/USD pares the rally from September, we could see another break to the downside as market participants speculate Portugal and Spain to seek assistance in the near future, but the pair should be able to find near-term support around the 200-Day SMA at 1.3133, which coincides with the 38.2% Fibonacci retracement from the 2009 high to the 2010 low around 1.3100-30.
British Pound To Face Headwinds as Speculation For Further Easing Resurface
The mixed testimony by the Bank of England suggests that the central bank may look to expand monetary policy further over the coming months as they expect the tough austerity measures in the U.K. to bear down on the economic recovery, and the British Pound could face increased headwinds in the days ahead as investors weigh the prospects for future policy. However, as the GBP/USD continues to trade above the 38.2% Fibonacci retracement from the 2009 low to high around 1.5690-1.5700, there could be a short-term correction as we head into the following week, but speculation for an expansion in quantitative easing could spur a selloff in the sterling as policy makers maintain a cautious outlook for the economy.
