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Dec 07 - 05:55 AM

EUR/USD - COMMENT-Calm Before A Storm For EUR/USD As U.S. CPI Eyed

By Jeremy Boulton  —  Dec 07 - 03:42 AM

EUR/USD is easing towards the lows of June-November's steep 1.2135-1.1186 decline in subdued trade ahead of Dec.
10 U.S. inflation data that's likely to lead to an even more hawkish statement from the Federal Reserve next week.

This is probably the calm before a storm of activity in the diminished liquidity of year-end markets resulting in an acceleration lower as traders try to adjust to the prospect of more policy tightening than they currently envisage.

While their efforts to shift position will be impeded by poor liquidity, the need to adjust may be intensified by breaks of nearby major technical levels that will fuel volatility.

Although traders are short, bets on a drop were five times greater when EUR/USD dropped below current levels in 2019, and seven times larger in 2015.

The 2021 low, also 61.8% EUR/USD's long-term rise from 1.0340, is the likely trigger for a 1.1040 test with a break there suggesting EUR/USD revisits the 2020 low at 1.0636.

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