EUR/USD Struggles Below 1.0445 Amid ECB’s Inflation Optimism and Holiday Lull

The EUR/USD pair continues to trade under pressure, hovering near 1.04059 as it struggles to break above the pivotal 1.0445 level.

European Central Bank (ECB) President Christine Lagarde recently expressed confidence in nearing the ECB’s 2% inflation target, but her cautious tone has left the market unimpressed. During an interview with the Financial Times, Lagarde suggested the ECB might not need aggressive monetary tightening moving forward, contributing to the Euro’s underperformance.

The ECB has already reduced the Deposit Facility rate by 100 basis points this year and is expected to lower it further next year. This approach reflects a cautious attempt to balance inflation control with economic risks in the Eurozone. Despite the progress in inflation reduction, challenges remain, especially in the services sector, where inflation persists above 3.9%.

Adding to the subdued trading conditions, the holiday-shortened week has reduced market activity, with German banks closed for Christmas Eve and Boxing Day. Thin liquidity has limited EUR/USD’s range, leaving traders eyeing upcoming U.S. economic data for direction.

U.S. Dollar Steady Amid Slower PCE Growth

The U.S. Dollar Index (DXY) remains steady, just below 108.00, after softer-than-expected growth in the Personal Consumption Expenditure (PCE) Price Index last week. Core PCE inflation rose by 2.8% year-over-year, slightly under the forecast of 2.9%. Monthly gains for both headline and core PCE were minimal at 0.1%, raising questions about the Federal Reserve’s monetary policy trajectory for 2025.

Cleveland Fed President Beth Hammack stated her preference for waiting on more definitive signs of inflation nearing the 2% target before adjusting rates. Meanwhile, Chicago Fed President Austan Goolsbee pointed to uncertainties surrounding fiscal policy under President-elect Trump as a key factor impacting rate expectations.

Traders are now focused on Tuesday’s U.S. Durable Goods Orders report, which is forecast to decline by 0.4% in November, following a 0.3% rise in October.

EUR/USD Technical Outlook: Limited Upside Potential

EUR/USD is struggling to gain ground, trading below the pivot point at 1.04248. A descending trendline near the 50-day EMA reinforces selling pressure. Key resistance levels are at 1.04450, 1.04898, and 1.05457, while immediate support lies at 1.03863, followed by 1.03500 and 1.02976.

EUR/USD Price Chart - Source: Tradingview

The RSI at 47.50 signals weak recovery potential, keeping the bearish outlook intact. A sustained break below 1.03863 could accelerate losses toward 1.03500. Conversely, a breakout above 1.04450 would be needed to shift momentum toward bullish territory.


Key Takeaways:

  • Lagarde’s cautious comments keep the Euro under pressure, with limited market activity during the holiday week.

  • Softer U.S. PCE data raises uncertainty abo

    ut the Fed’s 2025 rate cut plans.

  • EUR/USD faces resistance at 1.04450 and support at 1.03863, maintaining a bearish bias.

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ABOUT THE AUTHOR See More
Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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