EUR/USD Reaches Four-Month Peak on ECB Hawkishness and Dovish Fed Outlook
In the early Asian trading hours on Friday, the EUR/USD pair experienced a slight uptick, reaching its highest level in four months. This increase is attributed to a combination of a weaker US Dollar and the European Central Bank’s (ECB) hawkish posture.
Market attention now turns to the US Core Personal Consumption Expenditure Price Index (Core PCE) for November, expected to show a 0.2% month-on-month and 3.3% year-on-year rise. The pair is currently trading around 1.1008, marking a 0.05% gain for the day.
ECB Vice President Luis de Guindos recently remarked on the prematurity of monetary policy easing, noting the absence of technical recession forecasts for the Eurozone. His comments also highlighted the potential benefits of EU fiscal reform in reducing market uncertainty.
Meanwhile, ECB Governing Council member Martins Kazaks emphasized the need to maintain current interest rates for some time, suggesting the possibility of the first rate cut in mid-2024, later than market expectations.
Conversely, the US Federal Reserve appears to lean towards a more dovish stance, with speculation of 75 basis points in rate cuts in the latter half of 2024. US economic data further influenced market sentiment, with the US GDP for Q3 showing a 4.9% expansion, below the projected 5.2%.
This weaker data, along with expectations of Fed rate reductions, has placed downward pressure on the US Dollar, subsequently boosting the EUR/USD pair.
Upcoming economic releases from Germany, France, and Italy, including the German Import Price Index and Consumer Confidence data, will also be closely monitored. The US Core PCE data release on Friday is poised to be a significant market mover, potentially impacting trading strategies for the EUR/USD pair during the holiday season.
Technical Outlook for EUR/USD
The EUR/USD pair struggled to maintain a position above the 1.0960 level, eventually breaking below to set a lower high, as indicated on the chart. This pattern suggests a potential downward trend in the upcoming sessions, with an initial target of 1.0860.
A bearish outlook is maintained for the day, contingent upon the pair not breaching the 1.0960 level and sustaining above it. Overcoming this threshold could signal the onset of a bullish wave targeting the 1.1080 region in the near term.
The anticipated trading range for today is between the 1.0860 support and 1.1000 resistance, with the overall trend expected to be bearish.
EUR/USD Live Chart
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