EURUSD Drops Steeply After Fed Fischer Consolidates December Rate Hike

Euro plunged to eight-month lows versus the U.S. dollar on Friday after Federal Reserve Vice Chairman Stanley Fischer strengthened the case for raising interest rate by the year’s end. The U.S. economic data on Friday also support the sentiment.

Speaking in a conference at the Central Bank of Chile, Fischer said “the case for removing accommodation gradually is quite strong” as the central bank has almost reached its goals for employment and price stability.

Fischer also expressed confidence that headwinds from financial markets “have generally improved’ compared to earlier this year thanks since initial market turbulence following the Britain’s June 23 referendum to leave the European Union had diminished. The Fed official stated that “I am cautiously optimistic that the drag on the U.S. economy and inflation from past dollar appreciation may have mostly worked itself out, and that foreign economies are on a somewhat more secure footing that poses smaller downside risks to the U.S. economy.”

As stated by data from the University of Michigan on Friday, consumer confidence rose to a five-month high in early November. The preliminary index of sentiment for the month climbed to 91.6 from 87.2 in October but it only reflected Americans’ optimism about the economy in the days before the presidential election concluded.

The final report for this month, which is scheduled for released on November 23th, will include additional interviews conducted through November 20th. The final version is expected to offer a full picture of how Donald Trump’s election as the 45th president of the U.S. has affected consumer attitudes.

The U.S. dollar has advanced for every single trading day since the start of this week and especially rallied against the Euro since the shock win of Republican Donald Trump amid speculation Trump’s spending plans will fuel inflation and spur economic growth. Fischer on Friday also talked about the need for more fiscal policy, saying more economic stimulus from the government would “ease the task of monetary policy.”

According to the CME Group’s Fed Watch Tool, the market-implied probability of a December interest-rate hike by the Federal Reserve, jumped above 80% after dropping to less than 50% as election results pointed to a Trump victory.

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Fig: EURUSD D1 Technical Chart

EURUSD fell deeper below the 61.8% bar and even dropped lower than the last low at 1.08500 – the trough since October 03rd. As can be observed from recent candles, most of them has long upper shadows, which indicate strong bullish force at early trade was eventually overshadowed by sellers. The market has neared the oversold zone, therefore, a correction is likely to happen.

Trade suggestion

Buy Limit at 1.08100, Take profit at 1.08500, Stop loss at 1.07900

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