Euro trades below 1.12 as Fed and ECB decisions come a day apart

• EUR/USD closes at its low, slipping below 1.1200 for the first time since 14 October.
• A rise in Ifo expectations to 91.6 lifts EUR/USD, but the gain disappears within 11 bars.
• Thursday's ECB decision is expected to leave rates unchanged, following the Fed's decision a day earlier.

A better-than-forecast German Ifo survey on Monday failed to sustain EUR/USD's advance: by the 11th five-minute bar, the pair had slipped below its level before the release. Subsequent demand for the dollar ahead of the Federal Open Market Committee (FOMC) meeting, which concludes on Wednesday, pushed the pair to its lowest level since 15 October. EUR/USD closed at that low, marking its first finish below 1.1200 since 14 October.

Ahead of the Fed meeting, the US two-year yield climbed to around 4.71%. At 3.75%-4.00%, the Fed's rate range already stands well above the European Central Bank (ECB) deposit rate of 2.50%. Futures imply a probability of close to 80% for a Fed rate rise in December, which would extend the dollar's interest rate advantage.

Against a forecast of 89.8, the Ifo business climate index advanced to 90.2. Expectations improved from 90.4 to 91.6, although the current assessment declined from 89.5 to 88.8. The stronger German outlook lends further support to the case for a December ECB rate rise, as anticipated by 64 of 73 economists surveyed by Reuters. The subsequent decline in EUR/USD was more than four times the size of its initial rise following the release.

Central bank decisions lead the calendar

Tuesday's US durable goods orders, due at 12:30 GMT, are expected to rise 0.6%, following a decline of 0.1%. The Fed is expected to leave rates unchanged in its statement at 18:00 GMT on Wednesday. Attention will then turn to Fed Chair Warsh's questions and answers at 18:30 GMT, with a December rate rise still an open question.

Tuesday brings the ECB's bank lending survey at 09:00 GMT, followed by a speech from ECB President Lagarde at 17:00 GMT. Its rate announcement is scheduled for 13:15 GMT on Thursday, when the deposit rate is expected to remain at 2.50%. The ECB's December decision will determine the euro side of the interest rate gap.

EUR/USD retreats below falling moving averages

About three-fifths of the rebound from the 14 October low just above 1.1100 to the 16 October high just above 1.1250 was erased by Monday's decline. EUR/USD trades beneath both its 50-day Exponential Moving Average (EMA), which sits just above 1.1350, and its 200-day EMA, just below 1.1500. Both averages have declined in every session since mid-September.

EUR/USD chart: 5-minute timeframe