Monday, November 23, 2015

EUR/USD drops ahead of Fed decision on discount rate

FXStreet (Mumbai) - The EUR/USD fell in Asia to a low of 1.06 handle before recovering slightly to trade around 1.0616 (Friday’s low) ahead of the Fed’s closed meeting on the discount rate.

Fed to pre-committ to liftoff?

A hike in the discount rate (rate at which the commercial banks borrow money from the Fed. It is not really a discount rate, but a premium over the Fed funds rate) would be a signal that the normalization process has begun and would be followed by a rise in the Fed funds rate at the Dec 16 Fed meeting.

At the September closed meeting, 8 of 12 regional Fed banks had argued for a hike in the discount rate. Since then, the data has improved a step further and thus the probability of the hike in the discount rate today cannot be ruled out.

Meanwhile, the shared currency could also take cues from the preliminary PMI figures due across the Eurozone.

EUR/USD Technical Levels

The immediate resistance is seen at 1.0671 (hourly 100-MA), above which the gains could be extended to 1.075 (hourly 200-MA). On the lower side, 1.06 could offer support, but a break below the same would expose 1.0520 (Apr 13 low) and 1.0463 (Mar 13 low).
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