Always Higher The information presented in this publication is provided purely for informational purposes and does not constitute investment advice, a sales offer, or a solicitation to purchase, and should not, under any circumstances, be used as a basis or considered an encouragement to engage in any investment. The macro point Always HigherMacro PointVolatility has returned to the foreign exchange market. USD pairs have experienced significant fluctuations in recent sessions. The dollar index, a market reference, shows a weekly increase of 1%. The euro's decline against the US dollar is impressive (-1.3% in one week). Concerns about the inflation trajectory largely explain the movements observed in exchange rates. Last week's release of October price evolution figures reinforced fears that inflationary pressures may be more enduring than initially anticipated. Inflation has reached levels not seen in decades in the UK (+4.2% year-on-year), the eurozone (+4.1% year-on-year), and Canada (+4.7% year-on-year). The record is held by Canada, where the price increase is the highest recorded in 18 years. In this context, traders are increasingly questioning the duration of inflation. It seems that inflationary pressures are not over. The prospect of a very harsh winter in Europe is likely to lead to a continued rise in energy prices. This will directly impact the inflation calculation. Meteorologists are announcing a wave of polar cold this week over much of the European continent. November inflation figures, to be published in December, are expected to be concerning. Furthermore, inflationary pressures are fueling expectations of tighter monetary policy by central banks. In Canada, central bank Governor Macklem indicated in an op-ed published by the Financial Times that a first rate hike is imminent. In the UK, Governor Bailey acknowledged before parliamentarians that the inflation level is too high. According to the money market, there is a 60% probability that the Bank of England will raise its key rate by 25 basis points in December. Caution is advised, and an appropriate currency hedging strategy should be considered. The institution disappointed traders at its early November meeting. In Iceland, the central bank increased its key rate by 50 basis points to 2%. Only the European Central Bank seems stubbornly refusing to accelerate its monetary policy normalization timetable. Early last week, Lagarde indicated that the conditions are not in place for a rate hike in 2022 in the eurozone. The central bank seems more concerned about the growth trajectory, which could be disrupted by the Covid resurgence, than by the strong price increase. The European Central Bank is not immune to a monetary policy mistake. Health-wise, Europe is facing a fifth wave. This is bad news for the euro. But it's too early to know the economic repercussions. Some countries are opting for national lockdowns (Austria). Others are leaning towards strengthening restriction measures (school masks, etc.) and increased telework. This last option will likely be favored by France. The vaccination rate and the number of ICU hospitalizations will be the two indicators to watch closely in the coming weeks. Their development will dictate the implementation of the next pandemic control measures. Technical point Movements have been strong in the foreign exchange market in recent sessions. The euro is in a nearly universal decline. The EUR/USD has broken through several important supports. Short-term profit-taking cannot be ruled out. But the long-term trend is bearish. The levels to watch are 1.1143 and 1.1100 initially. In trading rooms, some analysts are starting to talk about a return to parity for the pair. It's a distant target. But it clearly shows how significant the distrust towards the single currency is at the moment.The supports and resistances displayed below respectively indicate the low and high points within which the rates should evolve during the week.SUPPORTSWEEKLYRESISTANCESWEEKLYS2S1R1R2EUR/USD1.11001.11431.13801.1495EUR/GBP0.80500.82700.84920.8582EUR/CHF1.01781.03901.06501.0742EUR/CAD1.38481.39801.44561.4618EUR/JPY127.00127.50130.67131.10For personalized advice on trends and foreign exchange hedging, contact our trading floor. Announcements to follow The economic calendar for the week is light. But turmoil in the exchange market should persist. The health situation will need to be monitored closely. The IFO business climate index in Germany for November is the main statistic to watch. Consensus anticipates an index of 97.9 – slightly up from October (97.7). The morale of business leaders in Germany is not great. They are worried about inflationary pressures (once again…) that could harm economic activity. The publication of growth figures for the third quarter in several countries (Germany and the United States) should not have major consequences on the currency market.Below you will find publications and events that should have a major impact on the evolution of currency rates.DAYTIMECOUNTRYINDICATOREXPECTATION22/1109:30PMIs (October)The composite PMI is expected to remain stable at 54.1.23/1109:30Manufacturing PMI (November)Decline to 56.5 from 57.8 in October.24/1110:00IFO Business Climate Index (November)Consensus anticipates an increase to 97.9 from 97.7 previously.14:30Quarterly GDP Q3In a new estimate, a 2.2% increase expected from the second quarter.25/1108:00Quarterly GDP Q31.5% increase from the second quarter according to consensus.Did you like this content? Share it!