So little time left to New Year, and on the threshold of holiday calm period on Forex market I will present a series of paragraphs, devoted to the forecast for the main currency pairs in the medium term perspectives. Let’s start from the EUR/USD as usual.
In the third quarter of 2012 the EUR/USD currency pair has turned bullish from the low 1.2041 (July, 24) to record high 1.3171 (September, 17). After this it rolled back to 1.2661 (November, 13). Fibonacci levels which correspond to this bullish trend are marked with orange color on my chart. So, it rolled back to the Fibonacci level 38.2% before upward movement. On the 5th of December the EUR/USD currency pair reached its record high 1.3126, and almost fully compensated for drop in autumn.
But this time the currency pair also didn’t manage to break autumn high 1.3171 and continue to rise. It started falling again. The point is that almost during all autumn the EUR/USD currency pair was trading from 23.6% to 38.2% Fibonacci levels, that is to say it rolled back from 1.4939 (2011 high) to 1.2041 (2012 low). These levels are marked with blue color on my chart: 23.6% corresponds to 1.2725, а 38.2% – 1.3148. Thus, the euro needs to break strong resistance above 1,3148 in order to rise above autumn high. But it didn’t manage to do it three successive times.
This time news about the ECB meeting on the 6th of December interfered with it. In the end of press conference Governor of the Central Bank Mario Dragi announced that there was a discussion on probable interest rate cut during the meeting. And though, I forecasted that the ECB would keep rates unchanged this time, Dragi worsened the outlook for GDP dynamics in 2013. New range of the forecast (from -0.9% to +0.3%) shows that according to the expectations of the ECB, E-17 GDP hardly go beyond zero level the next year even under the most optimistic conditions. And it is most likely that it will show bad result. Such forecast gave rise to expectations that the ECB will cut the interest rates in the nearest future. And, as usual, it has already influenced the prices on Forex market, and it caused selling the euro.
As a result, we see that the EUR/USD returned to the middle of its autumn trading range. If it breaks the resistance at 1.2905, the euro may reach 1.2725 – 1.2740 very fast. Only a serious injection of optimism may rescue European single currency.
Soon it may get such injection. Even two injections. The first one is FRS decision to implement QE3, which may be reached at the meeting on the 12th of December. The second one is a solution of the fiscal cliff problem in the US Congress (it more likely happens not before the 20th of December, taking into account the US congressmen habit to take a long time).
If both these events take place, it will cause risk-seeking on the Forex market. It will help the euro hit a high of its autumn range and even break higher above it. However, this scenario is not guaranteed. After all, lately markets interpret good news from the USA in favor of the dollar, but not in favor of the market assets.
AUTHOR: SERGEI GLUSHKOV
AUTHOR: SERGEI GLUSHKOV
