EUR/USD headed for turmoil on FOMC and 2017's political outlook

EUR/USD is lower again in Asia after another bazooka from the ECB last week in respect to their QE extensions, coupled with concerns over the Italian and European banking crisis that could be the New Year event instead of China this time around, both are supporting the greenback as a safe haven and a bearish outlook for the single currency, as funding currency.

Analysts at Rabobank, in their recent report, said in a summary, "Recent economic data have been in line with the Fed's expectations. What's more, markets have responded positively to the outcome of the elections and are pricing in a 100% probability of a December hike. So unless there is a major disruptive event between now and December 14, the FOMC will raise its target range for the federal funds rate to 0.50-0.75%."

Fed December hikes: an annual thing - Rabobank

In respect to the ECB, they are committed to their asset purchases programme and the dovish tone of the Draghi has fuelled speculation for parity vrs the dollar. It could be just as well due to the onset of political uncertainties taking fold next year in Euroland. Considering Draghi has extended the QE programme, albeit at a slower pace, he has done so until Dec and 2017 which means there will be plenty of cheap money around to soften the impact of German elections and subsequent volatility in the autumn of 2017.

EUR/USD levels

"On the assumption that populist parties do not prevail in next spring's Dutch and French election, we are forecasting EUR/USD at 1.10 on a 12 mth view," offered analysts at Rabobank. Meanwhile, spot is currently trading at 1.0551 EUR/USD after a retreat from 1.0875 recently on the ECb decision's initial spike, before a breakdown through the 1.0620 and the 20 day ma with focus now set on the recent low at 1.0505 and 1.0467, the March low. "This remains a major break down point to parity," explained analysts at Commerzbank.

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