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The EURUSD pair is back towards the 1.1300 level after the greenback failed to build upside momentum after the Federal Reserve upped the pace of tapering as widely expected.
Many investors and traders believe that QE tapering is likely to be further supportive of near-term US dollar strength, however, this has so far failed to be the case.
Another big factor that traders need to consider is the December ECB meeting. It is possible we are seeing a EURUSD short squeeze ahead of today’s ECB meet.
The central bank is on course for closing the Pandemic Emergency Purchase Program (PEPP), but investors are questioning the Asset Purchase Program (APP) and economic forecasts amidst the Omicron variant spreading.
The central bank has made it clear that it is “very unlikely” that they would hike rates in 2022, insisting that higher inflation will likely be temporary.
Like most nations, traders are expecting an upward revision to inflation projections in the eurozone, for this year and the next ones.
Growth could suffer a downward revision as the region is currently struggling with restrictions due to the rapid spread of Omicron. The scenario could be very bearish for the EURUSD pair.
Sentiment is also starting to rise, which is a bad sign for bulls. Positive sentiment has increased since last week, despite the differences between both central banks
The ActivTrader Market Sentiment tool shows that some 68 percent of traders are bullish towards the EURUSD. This sentiment metric is not at peak euphoria, but it is worrying as the FED withdrawals QE.
EURUSD Short-Term Technical Analysis
The four-hour time frame continues to show that the EURUSD pair is testing towards key Ichimoku resistance, meaning that upside risks are building.
Further gains above the 1.1300 level would likely see more gains towards the 1.1350 levels as bullish momentum grows. The 1.1350 level is also a solid bearish swing area for EURUSD traders.
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EURUSD Medium-Term Technical Analysis
Looking at the daily time frame, we could likely see a final test of Ichimoku cloud resistance this week if bulls gain traction above the 1.1300 level.
If the EURUSD pair continues to hold above the 1.1300 level then a move to neckline resistance, around the 1.150 area could happen this month, Any weakness sustained under the 1.1250 level could spell heavy losses for the EURUSD pair.
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