EUR/USD Has Nothing Going in 2024 Besides the ECB, As Inflation Keeps Falling

The Euro continued to remain bullish until Thursday, reaching 1.1140 as it has continued to benefit from the ECB’s hawkish stance. Markets have been expecting the ECB to start easing policy. Policymakers at the ECB highlighted that their choices are data-driven and unaffected by market pricing or external forces.

EUR/USD Weekly Chart – The Climb Stopped at the 200 SMA

This tough stance has given the EUR a boost, contributing to the EUR/USD 4 cent advance in December. After breaking above 1.10 last week, the EUR/USD reached its highest level since July earlier this week, rising beyond the 1.1000 mark as market activity ramped up again during the holiday season. Buyers didn’t really encounter much resistance during December, until the end of the month, implying that this pair will begin next year in a bullish manner.

However, buyers ran into the 200 SMA (purple) on the weekly chart, which rejected the price and EUR/USD closed the week with an upside-down pin candlestick, which is a bearish signal after the increase. However, it is tough to read into the price action during this time of the year, with liquidity being low and cash flows driving markets around. Besides that, the Eurozone economy is heading toward a recession and inflation is slowing, as the CPI (Consumer Price Index) report released on Friday showed.

Spain December Preliminary CPI Released by INE – 29 December 2023

• December Preliminary CPI (Consumer Price Index): The year-over-year (y/y) change in the CPI for December is reported at +3.1%. This is slightly lower than the expected +3.2%.
• November CPI YoY: The year-over-year change in the CPI for November was +3.2%.
• Core Annual Inflation: Core inflation, which excludes certain volatile elements like food and energy, is reported to be easing further to 3.8% in December.
•  This is a decrease from the 4.5% reported in November.
• Headline Annual Inflation: The headline annual inflation rate appears to be sticking around just above 3%. This suggests that, despite the slight dip below 2% in June, inflation has remained relatively elevated.

EUR/USD Live Chart