EUR/USD Slips to 1.04100 Amid Fed Rate Outlook and ECB’s Dovish Stance

EUR/USD hovered near 1.04100 on Friday, down 0.10%, as the pair struggled for direction amid subdued trading due to the holiday season.

The US Dollar Index (DXY) remained above 108.00, bolstered by market expectations of a gradual easing in the Federal Reserve’s monetary policy. The Fed’s latest dot plot suggests two rate cuts in 2025, reflecting a slower path than previously anticipated.

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Additionally, upbeat labor market data provided support for the USD. US Initial Jobless Claims for the week ending December 20 came in at 219K, lower than the forecast of 224K, highlighting labor market resilience despite broader economic uncertainties.

Euro Outlook Dampened by ECB Rate Cuts

The Euro continues to face challenges as the European Central Bank (ECB) maintains its dovish stance. The ECB has already reduced its Deposit Facility rate by 100 bps this year, with another 100 bps cut expected in 2025. Inflation in the Eurozone remains above the central bank’s 2% target, yet ECB President Christine Lagarde remains confident in achieving sustainable disinflation.

Lagarde recently noted the importance of vigilance regarding inflation in the services sector. ECB policymakers have indicated that rates will continue to decline until the deposit rate reaches a neutral 2% level, balancing inflation risks.

Technical Outlook: EUR/USD at Key Levels

EUR/USD trades near 1.04100, below its pivot point at 1.04430, reflecting a bearish bias. The 50-day EMA at 1.0402 and RSI at 52 suggest a neutral-to-bearish outlook.

EUR/USD Price Chart - Source: Tradingview
EUR/USD Price Chart – Source: Tradingview

  • Resistance Levels: 1.05029, 1.05453, 1.05972

  • Support Levels: 1.03430, 1.03033, 1.02722

A break below 1.04424 could see EUR/USD targeting 1.03626. Conversely, recovery above 1.05029 may pave the way for gains toward 1.05453.

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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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