USDOLLAR Index Lacks Conviction at Top as EUR/USD Steadies
- EUR/USD maintaining break below $1.1085/1.1100.
- GBP-crosses may be peripheral beneficiary of ECB, Fed moves.
FX markets are in need of catalyst. In the weeks after the European Central Bank and Federal Reserve policy meetings, it already seems that markets have priced in potential forthcoming policy changes: EUR/USD has dropped from near $1.1350 and steadied around $1.1000 after the ECB hinted at a deposit rate cut in December and the Fed hinted a rate hike in December was still possible.
Now that a potential deposit rate cut has been priced into EUR/USD already, and markets have already adjusted to the Fed's hawkish rhetoric, markets will require hard evidence for continuation of recent moves, in particular, if EUR/USD's bear flag originating in March will find follow through on its break lower. Any combination of data that suggests weaker inflation in the Euro-Zone or stronger US growth during Q4'15 is required for EUR/USD to continue its march towards $1.0800.
--- Written by Christopher Vecchio, Currency Strategist
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