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EUR / USD pair declines amid strengthening dollar and statements by Christine Lagarde

The EUR / USD pair is declining today from the weekly highs set the day before.

Investors continue to win back the outcome of the ECB meeting held on Thursday. As expected, the regulator left the main parameters of monetary policy unchanged, but Christine Lagarde complained that the rise in the euro exchange rate is putting pressure on inflation. Lagarde noted that the ECB will continue to closely monitor the euro and other major indicators. Investors took Lagarde's statements as a signal that if the euro continues to rise, the ECB could expand the PEPP program.

The dynamics of the movement of the dollar index exerts additional pressure on the currency pair today. The dollar index rose by more than 0.1% today due to declining risk appetite among investors. Major global indices are trading in the red zone. Investors are concerned about reports of a worsening epidemiological situation in Asia. Recently the Chinese authorities imposed restrictions on movement in some regions of the country in order to localize the outbreaks of the spread of COVID-19 noted there. The authorities are urging citizens to abandon traditional New Year's trips and celebrations.

In the middle of the trading day, the main focus of the market will be on the latest PMI data for the manufacturing and services sectors in Europe and the US. These data help to quickly track the degree of impact of the pandemic on the economic situation in the regions.

In Europe, a decline is expected. The European currency may come under pressure.

The US is also expected to release weaker data than in December. In addition, the US is expected today to publish statistics on sales in the secondary housing market for December.

On the chart, we note the buyer's unsuccessful attempt to break through the resistance at 1.2175. The currency pair turned down. In the short term, we are waiting for the breakdown of the level 1.2140 and a decline below 1.2100.

 

  • Resistance levels: 1.2175, 1.2255, 1.2335.

 

  • Support levels: 1.2140, 1.2050, 1.1920.

 

The main scenario is a decline below 1.2100.

Alternative scenario is a breakdown of resistance at 1.2175 and growth in the direction of 1.2255.

The current fundamental outlook is moderately negative. We consider shorts on a price rollback to 1.2175.

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