Euro Tests Resistance After Bank Plan Takes Shape
The Euro moved higher on Wednesday testing resistance levels near the October 2013 highs, but has been unable to break through as interest rate differentials remains stable. US yields moved lower on Tuesday, with the 10-year yield declining nearly 5-basis points to 2.8%. The EU agreed to a plan on handling failing banks in the future which should shore up the financial situation and reduce the chance of futures debt crisis.
The EU agreed on plan for dealing with failing banks. European finance ministers could be creating the conditions for a future run on banks after agreeing on a framework for dealing with failing firms in the sector. Crucially, major depositors will be a first to receive cash to shore up its finances. Money could then be taken from a country’s national resolution fund.
In Germany, consumer prices edged higher in line with expectations. German CPI rose 0.2% month over month in November following a drop of 0.3% in October. Year over year, inflation edged up to 1.3% from 1.2% in October. As in previous months, the low rate of inflation was mainly due to the falling prices of mineral-oil products.
The EURUSD attempted to test resistance near the October highs at 1.3830. A close above this level would lead to a test of weekly resistance near 1.42. Support on the currency pair is seen near the 10-day moving average at 1.3650. Momentum on the currency pair is strong with the MACD (moving average convergence divergence) index printing in positive territory with an upward sloping trajectory.
The RSI (relative strength index) is moving higher with prices, showing accelerating momentum while printing near 66, which is on the upper end of the neutral range.
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