EURUSD Could Have a Range Breakout on Fed Decision

On Wednesday, a Federal Reserve interest rate decision could see the EURUSD break from a 100 pip trading range. 

EURUSD - Daily Chart

EURUSD – Daily Chart 

EURUSD trades at 1.0789 with resistance at 1.0817 and support at 1.0724. 

The euro was boosted on Tuesday by more substantial ZEW economic sentiment figures. The latest ZEW reading was 12.8, three points up on November’s reading and well above the consensus for 8.8. The assessment of the current economic situation also improved by 2.7 points but was still in negative territory at -77.1. 

Achim Wambach, president of the ZEW Institute, said: “Despite the budget crisis, the assessment of the situation and economic expectations for Germany has once again improved. 

“This is due to the fact that the share of respondents expecting interest rate cuts by the European Central Bank in the medium-term has doubled. This, in turn, is good news for the German construction industry, for which we observe significantly more optimistic expectations this month.” 

Germany’s economy, dragged down by its manufacturing sector, shrank by 0.1% in the third quarter. 

Melanie Debono, Europe economist at Pantheon Macroeconomics, said: “Investor sentiment indicators are a bright spot for Germany and the Eurozone. They have so far been the only indicators positive on the outlook, but the increase in the composite PMI in November suggests maybe the tide is about to turn. Overall, these figures leave us confident in our view that the Eurozone and Germany GDP will rebound in the new year, after falling against this quarter.” 

Attention will now turn to the Federal Reserve after the latest inflation numbers from the US economy. The Consumer Price Index rose 3.1% for the 12 months ending in November, a slight drop from the 3.2% annual rate recorded for October. 

Analysts expect the central bank to remain at its current interest rate level with the announcement at 2am HKT and a press conference at 2:30 am HKT Thursday.

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