EURUSD Lagarde puts off the possibility of a rate hike, target of 1.1170 becomes clearer

European Central Bank President Christine Lagarde reiterated Friday

morning that the conditions for a rate hike are highly unlikely to be

met next year.

Lagarde was speaking at the Europea

Banking Congress in Frankfurt, where she warned that the ECB should not

rush into a premature tightening of monetary policy.

The

euro fell after Ms. Lagarde's comments, dropping below $1.1300. Banking

stocks also fell about 2%. The resurgence of Covid cases in Europe also

weighed on investor sentiment Friday morning, with Austria announcing

that it would impose a fourth nationwide lockdown on Monday.

Ms.

Lagarde had already sought to dampen expectations of an interest rate

hike next year, following the ECB's October policy meeting.

I

her speech today, Ms. Lagarde said that high inflation rates were

likely to continue to rise until the end of the year. On Wednesday, it

was confirmed that eurozone inflation reached 4.1% year-on-year i

October, more than double the ECB's target.

Ms.

Lagarde, however, said the inflationary pressure was unwelcome and

painful. But she said that while the ECB was taking concerns about

rising inflation seriously, she argued that the drivers of these price

pressures were likely to fade over the medium term, which is the

horizon that matters for monetary policy.

She did not

see the conditions in place, either at the level of the economy as a

whole or at the sectoral level, for inflation rates above our target to

become self-sustaining.

Thus, Ms. Lagarde explained

that while the ECB had seen strong “catch-up demand” in the euro area,

she did not see “excessive demand.”

The euro against

the dollar is now reversing a so-called “morning star” reversal

candlestick pattern and restarting the bearish momentum interrupted only

for two sessions.

Prices remain below a bearish

oblique as well as the 13- and 34-period descending moving averages. It

is therefore likely that the pair will reach the target of a double to

pattern validated in September on 1.1170, which corresponds to a support

line defined by the June 2020 lows.

 (Chart Source: Tradingview 21.11.2021)

A

return above the day high at 1.1375 would be the first signal of price

stabilization but the trend would only reverse above the former support

at 1.1525 and the bearish oblique. To sum it up, sellers are well i

control for now with a short play down to 1.1170 the next likely move.

Support & Resistance Levels:

R3      1.1913

R2      1.1700

R1      1.1525

S1      1.1241

S2      1.1170

S3      1.1100

Disclaimer:

This material has been created for information purposes only. All view

expressed in this document are my own and do not necessarily represent

the opinions of any entity.