EUR/USD Daily Fundamental Forecast – December 12, 2016

EURUSD continued to trade weakly to begin the day, the first day of the week when the Fed meeting is is to take place and likely to announce the first rate hike for the year. This event has been looked forward to, by the market for almost the entire year and hence we can safely expect a lot of volatility surrounding this event this week. It remains to be seen whether the strong support region around 1.05 will continue to hold or whether it will give way during the course of the week, which will then open the way for the progress of this pair towards parity.

The pair continued to trade weakly to begin the day as the events over the weekend in Italy weighed on the euro and should continue to keep the euro under pressure for the rest of the day. It looks as though some of the Italian banks might need a bailout and this, combined with the political uncertainty, has thrown the economy of the third largest economy in the Eurozone into turmoil. The discussions regarding the bailouts should begin once the new government assumes office and this will just mean more money and funds being thrown down the drain in order to save the banks. The markets realise this and thats why the euro began the day at the 1.0520 region and has recovered somewhat and trades above 1.0550 as of this writing.

Looking ahead to today, we do not have any news from any part of the world today and so we should expect some consolidation in the EURUSD pair with a bearish bias. At some point in the day, we can expect 1.0500 to come under scrutiny and we will then know how many buyers exist there and whether that would be enough to repel the attack from the sellers when it happens. Traders need to be wary of going long at this point but if they do, they will do well to have a stop loss just below 1.0460.