EUR/USD Price Analysis – Dec 11, 2023

Daily Price Outlook

Despite the bullish trend in the US dollar, the EUR/USD currency pair started the new week on a positive note and maintained its position above the 1.0770 level. However, the reason for its upward momentum could be attributed to the announcement of the European Central Bank (ECB) keeping interest rates unchanged until inflation returns to the target level. It should be noted that the market had anticipated the ECB's decision to maintain rates at their current level until inflation meets the target.

On the other hand, the bullish trend of the US Dollar in response to stronger-than-expected US employment data was seen as a key factor that capped further gains in the EUR/USD pair.

Stable German Inflation and ECB Rate Expectations Impacting EUR/USD Outlook

It's important to highlight that the German inflation data, as gauged by the Harmonized Index of Consumer Prices (HICP), stood at 2.3%, in line with market forecasts. As in result, the European Central Bank (ECB) decided to keep interest rates steady until inflation gets back on track.

Market analysts anticipate the possibility of the ECB implementing interest rate cuts in March 2024. But, the general belief is that the ECB will keep rates as they are until inflation meets the target.

Hence, the prospect of the ECB maintaining interest rates until March 2024 will foster a consistent environment, potentially influencing a stable performance for the EUR/USD pair.

US Labor Market Boosts Sentiment, Eyes on CPI and Central Bank Meetings

Moreover, the US labor market showed improvement in November, surpassing expectations with 199K new jobs, a drop in unemployment from 3.9% to 3.7%, and steady average hourly earnings at 4.0% YoY. This positive data led to a notable rise in Treasury bond yields as investors speculated that the Federal Reserve might postpone rate cuts in 2024.

Therefore, the bullish trend in the US Dollar was seen as a key factor that restrained additional gains in the EUR/USD pair.

Looking ahead, the focus is on the Federal Open Market Committee (FOMC) and ECB meetings this week. Before these key events, market watchers will pay attention to the US Consumer Price Index (CPI) on Tuesday.

EUR/USD - Technical Analysis

In the currency markets, the EUR/USD pair has displayed a modest uptick, nudging slightly upward by 0.01% to trade at 1.07628. Despite this fractional increase, the pair's movement suggests a tentativeness among traders, highlighting the market's current cautious sentiment. The pair sits just above a pivotal point at $1.0695, attempting to sustain momentum and breach immediate resistance levels at $1.0791 and potentially challenge further ceilings at $1.0860 and $1.0962.

Underneath the current price, there's a buffer zone extending to supports at $1.0619, $1.0523, and $1.0418, which are ready to act as soft landings should there be a pullback. From a technical standpoint, the Relative Strength Index (RSI) hovers at 38, signaling that the pair is neither oversold nor overbought, yet teeters closer to the territory where buyers may find value.

The Moving Average Convergence Divergence (MACD) indicator presents a microscopic positive value at 0.00022, contrasting with its signal line at -0.00221, suggesting the potential for an upward trend has not yet gained conviction among investors. Concurrently, the 50-day Exponential Moving Average (EMA) at $1.0769 serves as a critical juncture; the pair's trading above this level could indicate a short-term bullish trend, while a consistent position below could confirm bearish inclinations.

The technical analysis is further enriched by the observation of an upward channel breakout at 1.0805, signaling a shift towards a downtrend, a pattern that traders will monitor closely for confirmation.

Conclusively, the EUR/USD pair's short-term outlook is delicately balanced, with a lean towards bearishness below the $1.0769 threshold. Market participants are poised for a potential test of upper resistance levels, but not without considering the broader economic context that could influence the currency's path in the coming days.

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