Today we can sum up the first results of the key events of the week. The euro/dollar pair, after a small spike in volatility, actually remained at the same level, at the limit of 17 and 18 figures. As a result of previous meetings of the Fed and the ECB, traders remained in the dark regarding their further actions. The dollar and the euro finish the year in conditions of uncertainty - both about the prospects for the European monetary policy, and so and the rate of interest rate growth of the Fed.
It should be noted that the December meetings of the Fed and the ECB, in general, had similar features, albeit of a mirror character. While the Fed raised the rates but took a cautious stance, the European regulator, on the contrary, retained all the parameters of monetary policy, but assessed the future of the EU economy with optimism.
Nevertheless, the rate of the euro/dollar pair for the past day actually stumbled on the spot: only the price range of intraday trading has grown. The fundamental background is too contradictory: for every "positive" there is no less significant "negative".
For example, after optimistic comments on the development of the European economy, the tone of Mario Draghi's speech turned gloomy. He reiterated that powerful stimulus measures are needed to maintain the current growth of the EU economy. That's why the end date of QE can be moved, and only in the direction of 2019.
Separately, the head of the ECB stressed that the interest rate will not be increased for "a long time" after the end of the stimulus program. In other words, the interest rate is likely to be increased either at the end of 2019 or in 2020 (a time that is no longer within Mario Draghi's term). Such a downbeat mood disappointed traders, and the pair lost all the positions it won. Actually, the growth of EURUSD was also limited. Bulls of the pair could not keep the price above the key level of 1.1830 - from the technical point of view, it would make it possible to expect a price increase until the middle of the 19th figure.
But Draghi acted "in his repertoire." His speech consisted of consecutive positive and negative comments: the risk of deflation has come to naught, but in the near future inflation will slow down; economic growth will give momentum to inflation, but for this it is necessary to keep incentives; price pressure is gaining momentum, but the ECB's inflation forecast remains unchanged (given that the forecast for GDP growth has increased to 2.3% from 1.8%). Such statement did not allow bears or bulls of the EURUSD to find an clear reason for determining the direction of price movement.
However, following the results of the press conference of the head of the ECB, the bears of the pair still had an advantage. The market focused on the most disagreeable phrase that the volume of asset purchase can be increased, and the duration of the stimulus program is extended. Now again everything will depend on the current situation in the economy of the eurozone. And since the further growth of the EU economy (like inflation) is highly hypothetical, traders opted for the downward movement of the EURUSD.
The good data on retail sales in the US also served as an additional reason to reduce EURUSD positions. The indicator exceeded expectations, coming in at 0.8%, although experts expected it to clock in at 0.5%. Against the backdrop of the consumer price index, which came out at the forecasted level (+ 0.4%), such figures makes it possible to hope for a more substantial growth in US inflation next year.
Considering the price dynamics of the euro-dollar pair, it is not entirely correct to discuss about a price reduction or increase. Yesterday, the pair grew by almost 100 points, today it has returned almost to its former positions. Abstracting from the emotions of traders, it can be noted that the regulators of the US and Europe, in fact, took the expected decisions and did not say anything definite about the prospects for next year.
Too many "ifs" were in the statement of both the Fed members and the ECB. Thus, the question of a three-time increase in the Fed rate in 2018 remains, as is the issue of the completion of the European stimulus program. Traders did not get answers from their regulators to their main questions, therefore the key currency pair - EURUSD- remained on the same positions in anticipation of new news impulses.
From the technical point of view, the priority of the flat movement also remains. As stated above, the bulls of the pair could not hold the price above 1.1830 - in this case the indicator Ichimoku Kinko Hyo would have formed one of its strongest signals - a bullish "Line Parade". In this case, one could hope for a price increase to the upper line of the Bollinger Bands indicator on D1, that is, to the level of 1.1930.
The downward impulse, which we are now observing, is also limited by the levels of support. The nearest one is located at 1.1705 (the bottom line Bollinger Bands), and the next - at 1.1670 (the lower limit of the Kumo cloud).
