EUR / USD: US dollar rose on expectations of a further monetary tightening by the Fed

The US dollar strengthened its position against the euro and the British pound, as yesterday's decision of the European Court, which initially supported risky assets, actually made even more confusion in the Brexit deal.

Let me remind you that yesterday, Adviser to the European Court of Manuel Campos Sanchez-Bordona said that the British government has the right to unilaterally withdraw the decision to withdraw from the European Union. If such a decision is made, the consent of other EU members is not required for this.

However, this decision put the Prime Minister of Great Britain Theresa May in an awkward situation. Read more about this in my yesterday's review.

Meanwhile, the US leadership continued to talk about the breakthrough that was achieved in the trade negotiations this weekend. During yesterday's speech, US Treasury Secretary Mnuchin said that the US administration is no longer considering the introduction of new taxes since for the first time in a long time, it's really clear that China is ready for trade talks. Mnuchin is convinced that the deal with China is one of the largest opportunities for American workers and companies.

The data, which came out yesterday on ISM-New York, did not greatly affect the market. According to the report, the conditions indicator for doing business in the responsibility of the New York Fed in November fell to its lowest level in six months.

According to the report of the New York branch of the Institute for Supply Management, the index of current business conditions in November fell to 67.8 points against 69.8 points in October. Let me remind you that the index values above 50 mean acceleration of business growth. The employment indicator was 72.7 points against a high of 82.1 points.

The speech of the President of the Federal Reserve Bank of New York, John Williams, supported the US dollar since he spoke without any doubts about the further prospects for raising interest rates by the Federal Reserve System.

Fed President New York Williams expects a further gradual increase in interest rates, if necessary, as the Fed has been very successful in managing its employment and inflation mandates. Williams is also confident that the economy is in very good condition and growth should continue at least 3% this year and 2.5% next.

With regard to inflation forecasts, the Fed representative expects that it will slightly exceed the target level of 2%.

Regarding the monetary policy outlook, the Governor of the Federal Reserve Bank of New York noted that the timing of future rate increases is an important subject for discussion, and gradual rate increases over the next year or so are still likely, but will directly depend on incoming data.

Let me remind you that quite recently, Fed Chairman Jerome Powell said that the level of neutral interest rates was almost reached, which led to a sharp decline in the US dollar against the euro and the British pound, since such statements may affect the rate of interest rate increase next year.

As for the current technical picture of the EUR / USD currency pair, a breakthrough of a large support level in the area of 1.1310 may lead to a larger sell-off of the European currency with a rise to the lows of last month in the 1.1270 area. In the case of an upward correction, provided that the pair fails to break below 1.1310, the upward potential will be limited by resistances of 1.1380 and 1.1410.