EUR/USD Hits $1.0555 as USD Strengthens Amid Fed Rate Cut Expectations
The EUR/USD currency pair continued to struggle during Wednesday’s European session, slipping to the $1.0555 level.
The decline came as the US dollar gained strength, supported by expectations of slower rate cuts from the Federal Reserve (Fed). Analysts anticipate a potential 25 basis-point reduction in December, which could place rates in the 4.25%-4.50% range.
This outlook, coupled with resilient US inflation and economic growth, has bolstered demand for the Greenback.
Additionally, geopolitical tensions added a layer of uncertainty. The USD received a boost after Russian President Putin revised nuclear doctrine in response to US missile support for Ukraine, positioning the dollar as a safe-haven asset.
While some relief came from Russia’s reassurance of avoiding nuclear escalation, the bullish sentiment around the dollar continued to weigh heavily on EUR/USD.
Eurozone Weakens Amid Geopolitical and Economic Concerns
The Euro remains under pressure due to a deteriorating economic outlook in the Eurozone. Ongoing geopolitical tensions, weak domestic demand, and political instability in Germany have dampened investor confidence. Policymakers at the European Central Bank (ECB) are prioritizing growth support over inflation control, signaling a dovish stance.
ECB’s Fabio Panetta recently remarked that inflation is nearing its target and domestic demand remains fragile, suggesting no urgency for strict monetary policies. In December, the ECB is expected to lower its Deposit Facility Rate by 25 basis points to 3%, marking the fourth rate cut this year.
Meanwhile, Eurozone wage growth rose to 5.42% in Q3 from 3.54% in Q2, potentially aiding consumer spending but highlighting persistent challenges. The EUR/USD pair is likely to face additional headwinds unless the ECB signals stronger measures to bolster the economy.
Technical Outlook: Key Levels for EUR/USD
The EUR/USD is trading below its 50 EMA on the 2-hour chart, currently at $1.05799, indicating bearish momentum. Key support at $1.05414 aligns with the ascending trendline, while immediate resistance lies at $1.05799.
A breakout above resistance could open the path to $1.06361 and $1.06804. Conversely, a breakdown below $1.05414 exposes the pair to $1.04722 and $1.04224.
Key Insights:
- Pivot Point: $1.05498.
- Support Levels: $1.05414, $1.04722, $1.04224.
- Resistance Levels: $1.05799, $1.06361, $1.06804.
With RSI at 44.62, bearish sentiment prevails, but oversold conditions may attract buyers near support zones.
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