EUR/USD Price Analysis – Jan 03, 2025
Daily Price Outlook
During the European trading session, the EUR/USD currency pair started the 2025 trading year with a sharp decline, dropping by 0.8% and reaching the 1.0250 level, marking its lowest point since November 2022, a nearly 26-month low.
The drop was driven by disappointing European Manufacturing Purchasing Managers Index (PMI) data, which came in below expectations.
This added to the pressure on the euro, as traders were already feeling uneasy after dovish comments from European Central Bank (ECB) policymaker Yannis Stournaras later in the day.
On the flip side, the US dollar continued its upward momentum, climbing to a fresh multi-year high of 109.56 following the release of the latest US Jobless Claims data.
The combination of weaker economic data from Europe and a stronger dollar kept the EUR/USD pair firmly on the back foot, with traders closely monitoring upcoming developments for any signs of a reversal.
EUR/USD Under Pressure Amid Weaker European Data, Dovish ECB Outlook, and Rising Petrol Prices
On the EUR front, the European Manufacturing Purchasing Managers Index (PMI) data missed expectations on Thursday, further adding to the pressure on the euro.
This was followed by a dovish comment from European Central Bank (ECB) policymaker Yannis Stournaras, who stated that the ECB plans to gradually lower interest rates through 2025. He suggested that rates could be around 2% later this year, which signals a more cautious approach from the ECB.
With the Federal Reserve expected to reduce interest rates more slowly than initially anticipated in 2025, the interest rate gap between the Euro and the US dollar is likely to grow, putting additional downward pressure on EUR/USD throughout the year.
This has led some analysts to predict that the euro could reach parity with the dollar in the near future.
In addition, the Pan-European PMI data showed a slight decline in December, coming in at 45.1, just below the expected 45.2.
While the data wasn’t a huge market mover, it highlighted the growing chance that the ECB may speed up its rate cuts to help the struggling European economy.
At the same time, rising petrol prices, reaching two-year highs, are adding to the challenges in Europe. Together, these factors are making it difficult for the euro to gain strength, keeping the pressure on EUR/USD in the long term.
Therefore, the combination of weaker European economic data, dovish ECB signals, and rising petrol prices is likely to keep the EUR/USD pair under pressure.
As interest rate differentials widen, the euro could continue to struggle, possibly pushing EUR/USD towards parity with the dollar.
EUR/USD – Technical Analysis
EUR/USD is trading at 1.0281, down 0.21% as bearish sentiment prevails, with the pair slipping below its pivot point at 1.02977.Immediate resistance is positioned at 1.03399, followed by higher levels at 1.03708 and 1.04122.
On the downside, support is found at 1.01664 and extends to 1.01308, underscoring critical zones for potential rebounds.
The RSI is at 30, signaling oversold conditions, which could attract short-term buyers, though caution is advised as bearish momentum remains dominant.
The pair is trading well below its 50-day EMA at 1.03862, reinforcing the bearish trend and suggesting a challenge to sustain any recovery above key resistance levels.
For a bullish reversal, EUR/USD needs to reclaim the pivot point at 1.02977, which could target the first resistance at 1.03399.
However, failure to hold support at 1.01664 may trigger further declines, exposing the pair to lower levels at 1.01308 or below.
Market participants should monitor price action near the pivot and RSI for signs of a rebound or continued downward pressure.
The current technical setup favors a cautious approach as EUR/USD hovers near critical thresholds.
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EUR/USD Price Analysis and Trade Forecast: Daily Trading Signal
Daily Price Outlook
- Resistance Levels: Immediate resistance at $1.03826; next targets at $1.04236 and $1.04581.
- Support Zones: Key support at $1.03100, with deeper levels at $1.02750 and $1.02355 offering safety.
- Momentum Indicators: RSI at 33 suggests oversold conditions; price remains below the 50 EMA at $1.04066, maintaining a bearish short-term outlook.
The EUR/USD pair is trading at $1.03549, down 0.49% as bearish sentiment dominates the short-term market outlook. On the 4-hour chart, the pivot point at $1.03441 is critical, acting as a key threshold for near-term momentum.
Immediate resistance is observed at $1.03826, with higher levels at $1.04236 and $1.04581. Conversely, support is positioned at $1.03100, with further protection at $1.02750 and $1.02355, offering potential stabilization in case of extended selling pressure.
Technical indicators highlight bearish conditions, with the RSI at 33, signaling an oversold market ripe for a potential corrective bounce. However, the pair is trading below the 50 EMA at $1.04066, reinforcing a bearish bias in the short term.
A break below the pivot point of $1.03441 could accelerate selling, targeting the $1.03100 support level. On the upside, reclaiming $1.03826 resistance may encourage buyers, potentially driving the price toward $1.04236.
Market participants should closely monitor the $1.03441 pivot point, as sustained trading above it could signal a reversal of the bearish trend.
EUR/USD - Trade Ideas
Entry Price – Buy Above 1.03440
Take Profit – 1.04055
Stop Loss – 1.03085
Risk to Reward – 1: 1.7
Profit & Loss Per Standard Lot = +$615/ -$355
Profit & Loss Per Mini Lot = +$61/ -$35
EUR/USD Price Analysis – Jan 01, 2025
Daily Price Outlook
During the European trading session, the EUR/USD currency pair saw some bullish movement, trading around the 1.0358 level and even reaching an intra-day high of 1.0358. This rebound was largely driven by a weaker US Dollar, which has been under pressure due to declining Treasury yields.
Despite this short-term gain, the Euro faces ongoing challenges as the European Central Bank (ECB) has kept its stance on interest rates dovish for the coming year, which weighs on the Euro. Meanwhile, safe-haven outflows have added pressure to the Euro, especially as global uncertainty grows.
Moreover, the ongoing Russia-Ukraine conflict and tensions in the Middle East have spiked geopolitical risks, making investors more cautious and putting further strain on the Euro. These factors combined are likely to limit the EUR/USD pair's momentum in the near term.
Euro Faces Pressure from Geopolitical Risks and Safe-Haven Flows
On the EUR front, the European Central Bank (ECB) is taking a cautious approach with its interest rate policy for next year, which is weighing on the Euro and the EUR/USD pair. This year, the ECB lowered its Deposit Facility rate by 100 basis points (bps) to 3%.
Looking ahead, it’s expected that the ECB will reduce the rate further to 2% by June 2025, which policymakers consider a neutral rate.
This indicates that the ECB may cut its borrowing rates by 25 bps at each meeting in the first half of 2025, signaling a more dovish stance. As a result, the Euro faces downward pressure, limiting its potential to rise against the US Dollar.
On the other hand, the Euro is facing more challenges due to increased geopolitical risks. The ongoing Russia-Ukraine conflict and tensions in the Middle East are creating uncertainty in the global markets.
Recently, Israel's ambassador to the United Nations warned Yemen's Iran-backed Houthi militants to stop their missile attacks on Israel.
These geopolitical risks are pushing investors to move away from riskier assets, leading to outflows from the Euro. As a safe-haven currency, the US Dollar benefits in such times, further putting pressure on the Euro and the EUR/USD pair.
In addition to the ECB's actions, the Euro is facing more challenges due to rising geopolitical risks. The ongoing Russia-Ukraine conflict and increasing tensions in the Middle East are causing uncertainty in the global markets.
Recently, Israel’s ambassador to the United Nations, Danny Danon, warned Yemen's Houthi militants, backed by Iran, to stop their missile attacks on Israel.
Such geopolitical events tend to drive investors away from riskier assets, including the Euro, and into safe-haven assets like the US Dollar. This added risk further pressures the Euro, limiting its strength against other currencies.
EUR/USD – Technical Analysis
The EUR/USD pair is trading at $1.03549, down 0.49% as bearish sentiment dominates the short-term market outlook. On the 4-hour chart, the pivot point at $1.03441 is critical, acting as a key threshold for near-term momentum.
Immediate resistance is observed at $1.03826, with higher levels at $1.04236 and $1.04581. Conversely, support is positioned at $1.03100, with further protection at $1.02750 and $1.02355, offering potential stabilization in case of extended selling pressure.
Technical indicators highlight bearish conditions, with the RSI at 33, signaling an oversold market ripe for a potential corrective bounce. However, the pair is trading below the 50 EMA at $1.04066, reinforcing a bearish bias in the short term.
A break below the pivot point of $1.03441 could accelerate selling, targeting the $1.03100 support level. On the upside, reclaiming $1.03826 resistance may encourage buyers, potentially driving the price toward $1.04236.
Market participants should closely monitor the $1.03441 pivot point, as sustained trading above it could signal a reversal of the bearish trend.
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EUR/USD Price Analysis and Trade Forecast: Daily Trading Signal
Daily Price Outlook
- Pivot Point: $1.04430 is the critical level; bearish below this, bullish above.
- Support Levels: Immediate support at $1.03843, followed by $1.03430 and $1.03003.
- Resistance Levels: Key resistance at $1.04753, $1.05029, and $1.05453 limits upward momentum.
EUR/USD is trading at $1.04223, up 0.03% in the latest session, reflecting mild bullish sentiment as the pair hovers just below its pivot point at $1.04430. This level serves as a critical juncture for directional movement.
A sustained move below the pivot suggests bearish momentum, with immediate support at $1.03843 and further downside targets at $1.03430 and $1.03003.
Resistance levels are clustered at $1.04753, $1.05029, and $1.05453, forming a significant barrier for any upward movement.
The Relative Strength Index (RSI) at 54 indicates neutral to slightly bullish momentum, with no signs of overbought conditions. Meanwhile, the pair is trading slightly above the 50 EMA, which sits at $1.04117, signaling modest support for short-term gains.
The 4-hour chart reveals consolidation near the pivot point, suggesting indecision among traders. A sell strategy below $1.04427 with a target of $1.03836 and a stop loss at $1.04752 aligns with current technical trends.
However, a decisive breakout above $1.04430 could pave the way for testing the resistance at $1.04753. Market participants should remain vigilant as the pair navigates this critical zone, with key U.S. data releases likely to shape sentiment.
EUR/USD - Trade Ideas
Entry Price – Sell Below 1.04427
Take Profit – 1.03836
Stop Loss – 1.04752
Risk to Reward – 1: 1.8
Profit & Loss Per Standard Lot = +$591/ -$325
Profit & Loss Per Mini Lot = +$59/ -$32
EUR/USD Price Analysis – Dec 30, 2024
Daily Price Outlook
During the European trading session, the EUR/USD currency pair struggled to hold onto its modest gains and edged lower around the 1.0415 level, hitting an intraday low of 1.0409.
This downward move can largely be attributed to a combination of factors, including the thin trading volume due to year-end liquidity, which is common during the holiday season.
Moreover, the Euro has also faced bearish pressure in the final months of 2024, with a near 5.5% decline against the US Dollar (USD) as the European Central Bank (ECB) stuck to its dovish stance on interest rates, disappointing investors who had hoped for a more aggressive approach to combat inflation.
Meanwhile, the concerns over the Eurozone’s economic health have been mounting, particularly with the threat of tariff hikes under US President-elect Donald Trump. These tariffs are expected to negatively impact the Eurozone’s export-driven economy.
US Dollar Strength and Its Impact on EUR/USD Amid Economic Data and Fed Expectations
On the US front, the broad-based US dollar has been gaining strength, consolidating near a four-day support level as trading volume remains thin during the year-end period.
The Greenback is on track to close the year near its highest level, with higher Treasury yields providing a strong boost.
US bond yields have been rising recently as investors expect the policies under President-elect Trump, like higher tariffs and tax cuts, to drive economic growth and inflation.
The Fed has already signaled fewer interest rate cuts for 2025 in its latest projections, with Federal Fund rates expected to be around 3.9% by the end of the year.
After a hawkish rate cut in December, Goldman Sachs predicts the Fed will cut rates again in March, with two more cuts expected in June and September.
This week, investors are focused on the US ISM Manufacturing Purchasing Managers’ Index (PMI) data for December, due on Friday. The PMI is expected to drop slightly to 48.3 from 48.4, indicating that manufacturing output is slowing down at a slightly faster pace.
Therefore, the strengthening US dollar, driven by higher Treasury yields and Fed policy expectations, puts downward pressure on the EUR/USD pair.
ECB’s Dovish Policy and US Tariff Concerns Weigh on the Euro
On the EUR front, the EUR/USD currency pair is set to close the year with a nearly 5.5% decline against the US Dollar, largely due to the European Central Bank’s (ECB) dovish stance on interest rates.
The Euro has been especially weak in the last three months of 2024, as market participants are concerned about the Eurozone’s economic growth.
This worry is compounded by the incoming tariff hikes from US President-elect Donald Trump, which are expected to negatively impact the Eurozone’s export sector.
The ECB has already lowered its Deposit Facility rate by 100 basis points to 3% this year, and it’s expected to cut it further to 2% by the middle of 2025.
This would indicate that the ECB plans to lower its key borrowing rates by 25 basis points at each meeting during the first half of next year.
Many ECB officials are concerned about inflation falling below their target of 2%, particularly with the political uncertainty in Germany and potential trade tensions with the US.
Therefore, the ECB's dovish stance and anticipated rate cuts, combined with concerns over Eurozone growth and US trade tensions, are likely to weaken the Euro further.
As a result, EUR/USD is expected to remain under pressure, potentially leading to continued declines.
EUR/USD – Technical Analysis
EUR/USD is trading at $1.04223, up 0.03% in the latest session, reflecting mild bullish sentiment as the pair hovers just below its pivot point at $1.04430. This level serves as a critical juncture for directional movement.
A sustained move below the pivot suggests bearish momentum, with immediate support at $1.03843 and further downside targets at $1.03430 and $1.03003.
Resistance levels are clustered at $1.04753, $1.05029, and $1.05453, forming a significant barrier for any upward movement.
The Relative Strength Index (RSI) at 54 indicates neutral to slightly bullish momentum, with no signs of overbought conditions. Meanwhile, the pair is trading slightly above the 50 EMA, which sits at $1.04117, signaling modest support for short-term gains.
The 4-hour chart reveals consolidation near the pivot point, suggesting indecision among traders. A sell strategy below $1.04427 with a target of $1.03836 and a stop loss at $1.04752 aligns with current technical trends.
However, a decisive breakout above $1.04430 could pave the way for testing the resistance at $1.04753. Market participants should remain vigilant as the pair navigates this critical zone, with key U.S. data releases likely to shape sentiment.
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EUR/USD Price Analysis – Dec 27, 2024
Daily Price Outlook
During the European trading session, the EUR/USD currency pair gained some slight bullish traction, holding around the 1.0432 level.
However, the outlook for the Euro (EUR) remains weak, with market expectations that the European Central Bank (ECB) will continue its gradual interest rate cuts well into the first half of 2025.
As a result, the pair has been struggling to find clear direction, moving within a narrow range near 1.0400. Thin trading volumes, due to the Christmas holiday, have also contributed to the lack of significant movement in the pair.
On the other hand, the US Dollar (USD) has seen a small uptick, fueled by expectations that the Federal Reserve (Fed) will continue its gradual approach to policy easing, especially after inflation showed some signs of rebounding over the past few months.
With both central banks likely to follow divergent paths, EUR/USD remains stuck in this indecisive pattern as traders await clearer signals for the next move.
Euro Outlook Weighed Down by ECB Rate Cuts, Limiting EUR/USD Upside Potential
On the EUR front, the shared currency is struggling as the overall outlook for the Euro (EUR) remains negative. The European Central Bank (ECB) is expected to continue cutting interest rates at the current pace until mid-2025.
The ECB has already lowered its Deposit Facility rate by 100 basis points (bps) this year and is anticipated to reduce it by another 100 bps in the coming year. This is due to inflation in the Eurozone being more under control, although it is still above the ECB's target of 2%.
ECB President Christine Lagarde expressed confidence that inflation is moving in the right direction, saying that they are "very close" to achieving their 2% medium-term target.
However, she emphasized the need to remain cautious about inflation in the services sector. Recent comments from ECB officials suggest that they are aligned with market expectations of further rate cuts, aiming to bring the benchmark deposit rate down to 2%, which they consider a neutral level.
This cautious approach is meant to prevent inflation from falling too far below the target, which could pose risks to the economy.
Therefore, the ECB's continued interest rate cuts and cautious stance on inflation are likely to keep the Euro (EUR) under pressure, leading to limited upside potential for the EUR/USD pair. As a result, the pair may struggle to break higher levels.
US Dollar Strengthens Amid Gradual Fed Easing Expectations and Positive Job Data
On the US front, the broad-based US Dollar has been showing strength, trading higher as the market anticipates a gradual policy easing by the Federal Reserve (Fed).
Despite the slight rebound in inflation over the past three months, expectations for a slowdown in the Fed's interest rate cuts have kept the USD steady.
Recently, the Fed’s updated dot plot suggested two rate cuts in 2025, a revision from the four cuts previously expected. This has helped keep the USD in positive territory, as markets expect the economy to show solid growth under President-elect Donald Trump’s administration.
On the economic front, the latest data has been slightly better than expected. For the week ending December 20, initial jobless claims dropped unexpectedly to 219K, lower than the 220K recorded previously and better than the expected 224K.
Despite the positive job market data, analysts at BCA Research predict that the Fed will eventually cut rates by more than 50 basis points (bps) next year due to expectations that inflation will remain below the Fed’s 2% target and the unemployment rate will rise higher than forecasted. These factors suggest a more cautious outlook for the economy moving forward.
EUR/USD – Technical Analysis
The EUR/USD pair is trading at $1.04100, down 0.10% in the last session, as the pair remains under pressure near its pivot point at $1.04430.
Immediate resistance is located at $1.05029, with further resistance levels at $1.05453 and $1.05972. To confirm a bullish recovery, the pair must break and sustain above these levels.
However, the current bias suggests more downside risks. Immediate support lies at $1.03430, with subsequent levels at $1.03033 and $1.02722.
A break below $1.04424 could signal additional selling pressure, targeting $1.03626 in the short term. If bearish momentum persists, the pair may test deeper support levels at $1.03033 or even $1.02722.
Conversely, a recovery above $1.05029 would neutralize the bearish bias, paving the way for a potential upside toward $1.05453.
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EUR/USD Price Analysis and Trade Forecast: Daily Trading Signal
Daily Price Outlook
- Bearish Bias: Trading below the 50-day EMA at $1.0402 confirms downside risks.
- Critical Resistance: A breakout above $1.05029 is necessary to shift sentiment.
- Support Focus: A break below $1.04424 could target $1.03626 and $1.03033.
The EUR/USD pair is trading at $1.04100, down 0.10% in the last session, as the pair remains under pressure near its pivot point at $1.04430.
The 4-hour chart reflects a bearish inclination, with the pair trading below the 50-day EMA at $1.0402. The Relative Strength Index (RSI) at 52 indicates a neutral stance, leaning slightly bearish.
Immediate resistance is located at $1.05029, with further resistance levels at $1.05453 and $1.05972. To confirm a bullish recovery, the pair must break and sustain above these levels.
However, the current bias suggests more downside risks. Immediate support lies at $1.03430, with subsequent levels at $1.03033 and $1.02722.
A break below $1.04424 could signal additional selling pressure, targeting $1.03626 in the short term. If bearish momentum persists, the pair may test deeper support levels at $1.03033 or even $1.02722.
Conversely, a recovery above $1.05029 would neutralize the bearish bias, paving the way for a potential upside toward $1.05453.
EUR/USD - Trade Ideas
Entry Price – Sell Below 1.04424
Take Profit – 1.03626
Stop Loss – 1.04852
Risk to Reward – 1: 1.8
Profit & Loss Per Standard Lot = +$798/ -$428
Profit & Loss Per Mini Lot = +$79/ -$42
EUR/USD Price Analysis and Trade Forecast: Daily Trading Signal
Daily Price Outlook
- EUR/USD remains under pressure, trading below the pivot point at 1.04042.
- Immediate resistance at 1.04480, with support at 1.03430.
- RSI at 44 signals bearish momentum, with no clear reversal yet.
The EUR/USD is trading at 1.03912, showing a slight decline of 0.13% as it continues to face downward pressure. The pair is holding just below the critical pivot point at 1.04042, with immediate resistance at 1.04480, followed by 1.04973 and 1.05649.
These resistance levels are key for any potential bullish reversal, but the current trend remains bearish as the price is unable to break above the pivot point.
On the downside, immediate support is found at 1.03430, with further support levels at 1.03033 and 1.02722. The 50-day Exponential Moving Average (EMA) at 1.03957 is in close proximity, adding to the consolidation near the current price.
The RSI is at 44, indicating bearish momentum, with no signs of oversold conditions yet, suggesting that the price could continue its downward trajectory if it fails to hold above the support levels.
The market remains cautious, with volatility driven by economic data and geopolitical events. If EUR/USD fails to break above 1.04042, further downside could lead to a retest of the lower support levels.
However, a break above the immediate resistance at 1.04480 could shift the market sentiment, but this seems unlikely unless there is a significant shift in the underlying fundamentals.
EUR/USD - Trade Ideas
Entry Price – Sell Limit 1.04041
Take Profit – 1.03412
Stop Loss – 1.04361
Risk to Reward – 1: 1.9
Profit & Loss Per Standard Lot = +$629/ -$320
Profit & Loss Per Mini Lot = +$62/ -$32
EUR/USD Price Analysis – Dec 25, 2024
Daily Price Outlook
The EUR/USD currency pair is currently trading at 1.03912, reflecting a slight decline of 0.13%. This downward movement comes as the US Dollar (USD) continues to exert pressure on the Euro, with market volatility subdued due to the holiday season.
The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, is hovering just above the key 108.00 level, maintaining a steady range.
As traders prepare for a quiet market in the coming days, the broader outlook for the USD remains firmly positive, supported by the Federal Reserve's monetary policies and expectations of fewer interest rate cuts in 2025.
US Dollar Outlook: Fed's Slower Rate Cuts Boost Dollar
The Federal Reserve's recent guidance has significantly influenced the USD's strength. The central bank has indicated that it will slow the pace of interest rate cuts in 2025, with only two rate reductions planned, down from the previous projection of four.
As the Fed seeks to balance inflation control with economic growth, analysts, including those at UBS, predict that the Fed will deliver two 25-basis point cuts in the middle of the year.
The more gradual easing is due to persistently high inflation and a labor market that has shown more resilience than expected. This dovish approach has strengthened the US Dollar, which remains firm even as the global economic landscape shows signs of slowing.
EUR/USD: ECB's Dovish Stance Keeps Euro Under Pressure
The Euro continues to face headwinds, primarily due to the European Central Bank's (ECB) cautious stance on inflation and growth. ECB President Christine Lagarde recently indicated that the bank is nearing its inflation target of 2%, but warned that the services sector remains a point of concern.
With Eurozone inflation easing to 2.2%, services inflation remains elevated at 3.9%. This has raised concerns about the pace of monetary tightening in the region. Traders are betting on potential rate cuts by the ECB, with expectations for a 25-basis point reduction in each of the next four policy meetings.
GOLD (XAU/USD) – Technical Analysis
The EUR/USD is trading at 1.03912, showing a slight decline of 0.13% as it continues to face downward pressure. The pair is holding just below the critical pivot point at 1.04042, with immediate resistance at 1.04480, followed by 1.04973 and 1.05649.
These resistance levels are key for any potential bullish reversal, but the current trend remains bearish as the price is unable to break above the pivot point.
On the downside, immediate support is found at 1.03430, with further support levels at 1.03033 and 1.02722. The 50-day Exponential Moving Average (EMA) at 1.03957 is in close proximity, adding to the consolidation near the current price.
The RSI is at 44, indicating bearish momentum, with no signs of oversold conditions yet, suggesting that the price could continue its downward trajectory if it fails to hold above the support levels.
The market remains cautious, with volatility driven by economic data and geopolitical events. If EUR/USD fails to break above 1.04042, further downside could lead to a retest of the lower support levels.
However, a break above the immediate resistance at 1.04480 could shift the market sentiment, but this seems unlikely unless there is a significant shift in the underlying fundamentals.
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EUR/USD Price Analysis – Dec 23, 2024
Daily Price Outlook
During the European trading session, the EUR/USD currency pair continued its downward trend, struggling to break above Friday’s high of 1.0445. The pair remained under pressure, trading around the 1.0398 level and hitting an intraday low of 1.0387.
Meanwhile, the shared currency faced challenges after European Central Bank (ECB) President Christine Lagarde expressed confidence in the ongoing progress of reducing inflation during an interview with the Financial Times.
Her remarks suggested the ECB might not need to take an aggressive stance on tightening monetary policy, which weighed on the Euro’s performance.
Apart from this, the EUR/USD pair is expected to trade in a limited range this week due to low trading activity in a holiday-shortened period.
With Christmas Eve and Boxing Day falling midweek, thin market volumes have kept the currency pair constrained.
Traders remain cautious, as the holiday season often limits volatility and market opportunities.
EUR/USD Struggles as ECB's Rate Cuts and Inflation Outlook Weigh on Euro
On the EUR front, the currency pair is struggling as the euro continues to underperform. European Central Bank (ECB) President Christine Lagarde expressed confidence in reducing inflation, stating that the ECB is close to reaching its target of a 2% inflation rate.
She mentioned in an interview with the Financial Times that they are nearly at a point where they can declare inflation under control. However, the euro’s weakness is still visible as the market reacts to this cautious optimism.
The ECB has already reduced its Deposit Facility rate by 100 basis points this year and is expected to cut it by another 100 basis points next year.
This is largely due to concerns over the Eurozone's economic risks and the need to keep inflation in check.
Most ECB officials are aligned with the market's expectations for gradual rate cuts until inflation hits the 2% target, which they see as a neutral rate to avoid the risks of inflation falling too low.
Meanwhile, the economic calendar remains light, with investors looking ahead to Tuesday’s US Durable Goods Orders data, which is expected to show a decline of 0.4% in November after a 0.3% rise in October.
US Dollar Steady Amid Slower PCE Growth and Uncertainty Over Fed Rate Cuts
On the US front, the broad-based US dollar is steady after a sharp drop on Friday due to slower-than-expected growth in the US Personal Consumption Expenditure (PCE) Price Index.
The US Dollar Index (DXY), which tracks the dollar against six major currencies, is hovering just below 108.00. Core PCE inflation, which the Federal Reserve (Fed) watches closely, rose by 2.8%, slightly below the expected 2.9%.
Both headline and core PCE inflation increased by 0.1% month-on-month, leading to some uncertainty about whether the Fed will continue with its plans for gradual rate cuts in 2025.
Fed officials are now expecting fewer interest rate cuts next year, mainly due to the slower progress in reducing inflation and uncertainties around President-elect Donald Trump's policies on immigration, trade, and taxes.
Cleveland Fed President Beth Hammack, who voted to leave interest rates unchanged, said she prefers to wait for more evidence that inflation is returning to the 2% target.
Meanwhile, Chicago Fed President Austan Goolsbee mentioned that the uncertainty surrounding Trump’s policies has led to a shift in expectations, projecting fewer rate cuts than initially expected. Monday’s economic calendar is light, but investors will focus on the US Durable Goods Orders data for November, which is expected to show a decline of 0.4%.
EUR/USD – Technical Analysis
EUR/USD is trading at $1.04331, marginally up 0.04%, showing consolidation below the $1.04455 pivot point.
The immediate resistance is seen at $1.04799, with additional hurdles at $1.05318 and $1.05677, which align with Fibonacci retracement levels, suggesting potential for a short-term rally if these levels are breached.
On the downside, immediate support lies at $1.03865, with further levels at $1.03430 and $1.03033 providing a robust safety net.
The RSI at 57 indicates neutral-to-bullish momentum, but the pair is struggling to gain traction above its 50 EMA at $1.04313, signaling a lack of decisive trend direction.
The broader trend remains bearish as long as EUR/USD trades below the $1.04799 pivot point. Sellers dominate the market, with price action reflecting caution amid lingering uncertainty in the Eurozone and USD dynamics.
A move below $1.04449 could accelerate declines toward the $1.03853 take-profit target, while a sustained break above $1.04799 would shift momentum to the upside.
Sell positions are favored below $1.04449, targeting $1.03853, with a stop-loss at $1.04927. Watch for a breakout above $1.04799 to reassess sentiment.
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