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U.S dollar remains vulnerable following the FED’s announcement of no rate hikes until after 2020

Michael Harris
  • December 14th 2019, 20:46
  • Last Updated: December 14th 2019, 20:48
  • The U.S dollar remains vulnerable following Fed's announcement of no rate hikes any time soon.
  • EUR/USD challenged the long-held resistance at 1.1200 that was last seen in August 2019.
  • Last week's German ZEW economic sentiment further strengthened the European currency.
  • U.S-China phase 1 deal & the Conservative's victory also contributed to keeping USD under pressure.

According to MUFG Bank analysts, the U.S dollar didn’t derive a lot of strength out of the optimism of the U.S employment report in the past week. The analysts cited the Federal Reserve’s announcement that the rates are likely to remain unchanged in the upcoming year to have weighed on the greenback’s strength in the forex market.

EUR/USD Challenged The Long-Held 1.1200 Resistance

The analysts further added that the U.S dollar currently seems vulnerable in the currency market and a marked correction lower can be expected in the short-term. Experts also hinted that the EUR/USD pair has challenged the long-held (mid-2019) resistance at 1.1200 level in the past week that further accentuates the weakening U.S dollar index.

The U.S Fed announced in its policy meeting last week that as long as significant and sustained improvement isn’t observed on the inflation front, the rates are likely to remain unchanged. As per the voting of the policymakers, the majority is in favor of delaying the rate hikes until after 2020. Chairman Jerome Powell’s current stance on the monetary policy also helped in improving the global investor risk sentiment. Such are the factors that the MUFG Bank analysts agreed to have contributed to keeping the U.S dollar under pressure.

Eurozone’s Economy Noted Better Than Expected Recovery

On the other hand, the optimism of the German ZEW economic sentiment last week suggested a faster recovery in the Eurozone’s economy in the upcoming year that further energized the European currency, pushing EUR/USD higher to 1.1195 level.

As per the experts, the investors are only waiting for Eurozone’s hard economic data to turn green, following which, further upward rallies will potentially manifest in the financial markets. The recent announcement from the two largest economies of the word, the U.S and China that a phase 1 deal has been finalized, along with Conservative’s major victory in the UK’s general election, also contributed to driving the EUR/USD pair to the highest level since August 2019.

It was also forecasted that while the aforementioned currency pair still remains in a weak bullish trend, a daily close above 1.1200 will effectively mark the return of a bullish trend. Owing to the market’s drop to 1.1120 level, around which it closed the last week, however, experts recommend caution as the EUR/USD pair seems very volatile within the range of 1.1000 and 1.1200. The PMI reports in the upcoming week are like to stir some clarity regarding the long-term intention of the currency pair.

About the author

Michael Harris
Michael Harris
I began trading in my early 20's at a local company and since then have combined my knowledge and love of content to become a news writer. I am passionate about bringing insightful articles to readers and hope to add some value to your portfolios!

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