EUR/USD Price Analysis – Dec 08, 2023

Daily Price Outlook

During the early European session on Friday, the EUR/USD currency pair failed to halt its downward trend and lingered below the 1.0800 mark. Despite this, the Eurozone's prospects remain gloomy, and the markets anticipate the European Central Bank (ECB) to initiate interest rate cuts earlier than previously thought. The first move is now expected as soon as March 2024, putting pressure on the Euro (EUR).

Eurozone Economic Slowdown and ECB Rate Cut Speculations

It's worth noting that the Eurozone economy unexpectedly slowed in Q3 2023. The Gross Domestic Product (GDP) reported 0% YoY, worse than the expected 0.1%. On a quarterly basis, the growth contracted by 0.1%, meeting market forecasts. Last month, ECB board member Isabel Schnabel suggested rate hikes if inflation didn't hit the 2% target quickly. However, she shifted her stance after three low inflation readings. Now, markets are strongly betting on the ECB cutting interest rates earlier than expected, possibly as soon as March 2024. This shift is influenced by the recent economic slowdown and concerns about inflation staying below the target.

Therefore, the unexpected Eurozone economic slowdown and the probability of earlier ECB rate cuts have pressured the Euro. This has led to a decline in the EUR/USD pair as markets react to concerns about economic performance and monetary policy divergence.

US Labor Data and Employment Outlook

On the other side, data from the US Labor Department on Thursday showed that the number of Americans filing for unemployment benefits increased to 220K for the week ending December 1, slightly below the expected 222K. However, the ongoing unemployment claims dropped to 1.861 million from 1.925 million, beating the expected 1.919 million.

Therefore, the mixed US labor data may weaken the USD, providing a potential boost to the EUR/USD pair amid economic uncertainty.

Looking Ahead: Market Focus on US Employment Report

Looking ahead, investors are keeping a close eyes on the upcoming US employment report on Friday. Key indicators include Nonfarm Payrolls (NFP), Unemployment Rate, Average Hourly Earnings, and the University of Michigan’s Consumer Sentiment Index.

EUR/USD - Technical Analysis

In the current trading climate, the EUR/USD pair is showcasing a cautious stance, with a marginal downtick of 0.01%, stabilizing around the 1.07909 mark. This slight retraction reflects the pair's uncertainty ahead of key economic indicators that may sway the European currency’s valuation. The forex market, sensitive to such economic tides, is waiting for substantial triggers to define a clear direction.

The pair’s technical landscape is defined by a pivot point at $1.0727, which acts as a fulcrum for the currency's potential swings. Resistance levels are staged at $1.0801, $1.0910, and $1.0991, each representing a hurdle that could cap upward advances. Conversely, support levels at $1.0618, $1.0509, and $1.0397 provide a cushion against any downward pressures.

The Relative Strength Index (RSI) reads at 41, suggesting a lack of momentum in either direction, while the MACD’s slight positive divergence from its signal line may indicate an undercurrent of bullish sentiment. However, the current price hovers around the 50 EMA of $1.0791, depicting a market in equilibrium without a distinct bullish or bearish bias.

The technical setup hints at an upward channel breakout, which could signal a shift in momentum should the pair consolidate above the crucial $1.07924 level.

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