EUR/USD Price Analysis – Dec 13, 2024
Daily Price Outlook
During the European trading session, the EUR/USD currency pair maintained its bullish momentum, staying well-supported around the 1.0492 level and reaching an intra-day high of 1.0496. The upward rally can be attributed to the bearish US dollar, which reversed its earlier gains.
Despite strong expectations that the Federal Reserve (Fed) will adopt a slightly hawkish stance after cutting its key interest rates by 25 basis points (bps) to 4.25%-4.50% in Wednesday's policy meeting, the US dollar continued to lose ground.
Meanwhile, comments from European Central Bank (ECB) officials after the blackout period, signaling a dovish outlook on interest rates, failed to drag down the EUR/USD pair.
US Dollar Weakens Despite Hawkish Fed Expectations, Supporting EUR/USD
On the US front, the broad-based US dollar failed to extend its bullish trend and edged lower on the day as it faced selling pressure above the 107.00 level.
Despite strong expectations that the Federal Reserve (Fed) will maintain a slightly hawkish stance after cutting its key interest rates by 25 basis points (bps) to 4.25%-4.50% in the recent policy meeting, the Greenback continued to lose ground.
According to the CME FedWatch tool, traders have priced in a 25-bps rate cut for Wednesday but expect rates to remain unchanged at 4.25%-4.50% in the January policy meeting.
Analysts from Macquarie pointed out that the slowdown in US disinflation, a lower-than-expected unemployment rate, and strong US financial markets are contributing to the Fed's more hawkish outlook.
Adding to the hawkish sentiment, a faster-than-expected rise in the US Producer Price Index (PPI) data for November reinforced expectations of a more aggressive Fed stance.
The PPI report showed that both the annual headline and core PPI (excluding food and energy) increased by 3% and 3.4%, respectively.
Therefore, the US dollar's weakness and expectations of a more hawkish Fed stance have supported the EUR/USD pair, allowing it to remain bullish. The Greenback's decline, despite strong economic data, has helped the Euro maintain its strength against the dollar.
EUR/USD Resilient Despite Dovish ECB Outlook and Economic Concerns
On the EUR front, the shared currency continued to rise toward 1.0500, despite dovish remarks from European Central Bank (ECB) officials after the blackout period.
ECB policymakers, including Bank of France Governor François Villeroy de Galhau, Latvian central bank Governor Mārtiņš Kazāks, and Bank of Estonia Governor Madis Müller, have supported further interest rate cuts, which is generally negative for the Euro.
Furthermore, ECB President Christine Lagarde's comments on Thursday signaled that more rate cuts could be on the way.
The ECB recently reduced its Deposit Facility rate by 25 basis points to 3%, citing a weak Eurozone economic outlook.
Lagarde highlighted the slowdown in exports and weak business investment, suggesting the need for more policy easing.
She pointed out that manufacturing in the Eurozone is still contracting, and growth in services is slowing, while businesses are holding back on investments due to weak demand and an uncertain future.
Some ECB officials even supported a larger rate cut of 50 basis points, signaling concern over economic growth.
The ECB's new economic projections forecast the Eurozone economy to grow only 0.7% in 2024 and 1.1% in 2025, both lower than previously expected. Despite these concerns, the Euro remained resilient against the US dollar.
Despite dovish ECB comments and concerns over Eurozone growth, the EUR/USD pair remained resilient, supported by a weaker US dollar.
The Euro's strength continued as traders priced in the possibility of further rate cuts, but with limited bearish impact.
EUR/USD – Technical Analysis
EUR/USD is trading at $1.04554, down 0.11%, reflecting a bearish tone on the 4-hour chart. Prices hover below the pivot point at $1.04794, signaling sustained selling pressure.
Immediate resistance is at $1.05218, followed by $1.05622 and $1.05973. On the downside, support levels are positioned at $1.04270, with further barriers at $1.03987 and $1.03667, providing targets for bearish continuation.
The 50 EMA at $1.05172 confirms short-term downward momentum, with prices consistently trading below this level.
The RSI at 36 indicates bearish sentiment, nearing oversold territory, which may limit the scope for further immediate declines.
A Sell Limit entry at $1.04791 targets $1.04385, with a Stop Loss at $1.05104 to manage risk. A breach of $1.04270 would open the path to $1.03987, reinforcing the bearish trend.
Conversely, a recovery above $1.04794 could shift the tone, with resistance at $1.05218 acting as a key test for buyers.
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