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As Republicans seized control of the US senate, the greenback surged to a six-year high and saw the euro momentarily relinquish the $1.25 marker, falling to its lowest level in over two years.
$1.2439 in focus for EUR/USD today
This dollar revival is driven by the fact that US interest rates can only really go up, particularly in the wake of quantitative easing coming to a halt. Yet even if the Federal Open Market Committee delays interest hikes, when the likes of Japan and the eurozone continue to attempt a looser policy stance to stave off deflation, the divergence does tend to underpin the dollar upside.
Since, once again, German factory orders failed to meet expectations, rising 0.8% on the month against the consensus for a 2.2% expansion, there are still concerns that a technical recession is on the horizon for the powerhouse of Europe.
The European Central Bank rate decision today is unlikely to herald any changes, so as usual it will be the press conference at 1.30pm that will provide any catalyst in FX rates. It’s unlikely that any new measures will be announced given that Mario Draghi will want to see previous actions take effect first.
The 1.2480/90 area has provided something of a base for the single currency with the long-term rising trendline support from the lows seen back in December 2000. This is clearly an important level as any close below it from a weekly perspective will likely see the euro depreciate further, with the next major support coming at 1.2290.
Intraday the euro has pushed as low as 1.2439, so this level will be in focus today, and with price action trapped below both the 50- and 100-hour moving average we may well see the euro oscillate around the $1.25 marker this morning. Only a move through 1.2580 would help negate the negative bias on this pair.