The euro has given back earlier gains, which has seen EUR/USD hit a fresh higher high near 1.1059 which provides the backdrop for a continued uptrend. EUR/USD is presently showing a fractional 0.1% gain on the day, buoyed by an above forecast German ZEW investor survey, which lifted to an 11.6 headline reading. The market is maintaining a fairly neutral net exposure into the Fed’s announcement Wednesday, attentive to the possibility that an expected 25 basis points rate hike will be accompanied by bearish guidance from the Fed. Just as the ECB delivered a bearish decision a couple of weeks ago, while easing interest rates, the Fed looks set to deliver a dovish decision this week. This observance seems to be curtailing sustained direction in EUR/USD.
The German December ZEW Investor confidence rose to 16.1, above consensus. The ongoing rout in commodities prices and the prospect of a Fed hike don’t seem to have dented the uptrend in confidence significantly. More arguments against any further action from the ECB and while Draghi seems eager to keep hopes of more easing alive, there clearly is nothing firm on the agenda so far and if things go on like this, the ECB is likely to be done.
The currency pair continues to make headway making a fresh high following a bull flag pattern which saw a breakout followed by a consolidation. Target resistance is seen near a downward sloping trend line that connects the highs in August and the highs in October and comes in near 1.1250. Momentum remains positive with the MACD printing in the black with an upward sloping trajectory.