EUR/USD Price Analysis – Dec 22, 2023

Daily Price Outlook

The EUR/USD currency pair extended its upward rally and remained well bid above the 1.1000 level. However, the upticks were primarily driven by the weaker US Dollar (USD) and the hawkish stance of the European Central Bank, lifting the EUR/USD pair. Investors await November’s US Core Personal Consumption Expenditure Price Index (Core PCE) on Friday, projected to rise 0.2% MoM and 3.3% YoY.

ECB's Cautious Stance Favors Euro Amid Global Uncertainties

It is worth noting that the European Central Bank (ECB) Vice President, Luis de Guindos, mentioned on Thursday that it's too early to consider easing monetary policies. He assured that the ECB doesn't anticipate a technical recession in the Eurozone and expressed a positive stance on an EU fiscal reform deal, believing it would ease market uncertainties.

On a similar note, Martins Kazaks, a member of the ECB Governing Council, stated that maintaining current interest rates is necessary for a while. However, he suggested that the first rate cut might happen later than what investors are currently expecting, possibly not until around mid-2024.

Therefore, this news suggests a cautious approach by the ECB, supporting the Euro against the US Dollar.

Fed's Cautious Stance and Weaker US GDP Propel EUR/USD Pair

Moreover, the Federal Reserve (Fed) has taken a more cautious approach, hinting at possible 75 basis points (bps) in rate cuts in the latter part of 2024. On the economic front, the US Bureau of Economic Analysis (BEA) reported on Thursday that the country's Gross Domestic Product (GDP) in Q3 expanded by 4.9%, slightly below the market's 5.2% expectation.

Hence, this less-than-stellar US data, coupled with the Fed's expectation of three rate cuts, puts downward pressure on the US Dollar. This, in turn, provides support for the Euro against the Dollar (USD), benefiting the EUR/USD currency pair.

EUR/USD - Technical Analysis

On December 22, the EUR/USD pair presents a nuanced technical landscape as it trades slightly down by 0.09% at 1.1002. This subtle decline comes amid a complex interplay of economic factors and market sentiments. The pair is currently navigating a crucial juncture, with a pivot point set at $1.0765. On the upside, it encounters immediate resistance at $1.0885, with further barriers at $1.1025 and $1.1151. Conversely, the currency pair finds support at $1.0619, followed by lower levels at $1.0493 and $1.0366, which will be vital in cushioning any downward movement.

The Relative Strength Index (RSI) for EUR/USD stands at 64, suggesting a predominantly bullish market sentiment but still shy of overbought territory. This implies there might be some room left for upward momentum before any potential pullback. In contrast, the Moving Average Convergence Divergence (MACD) is at a modest 0.00017, just above its signal line at 0.00223, indicating that while there is potential for upward momentum, it might be limited.

A key observation in the chart patterns is the presence of a triple top pattern with resistance extending at $1.1006. This pattern usually signifies a critical resistance level, and its breach could pave the way for a bullish breakout. Currently, the EUR/USD pair is trading just above the 50-Day Exponential Moving Average (EMA) of $1.0984, reinforcing a short-term bullish bias. However, the triple top pattern's resistance level is crucial and needs to be closely monitored.

Given these technical indicators, the immediate outlook for EUR/USD is cautiously bullish, especially if it manages to break out above the $1.1008 mark. Such a breakout could lead the pair to test higher resistance levels in the short term. Conversely, failure to breach this critical resistance might see the pair retreating towards its support levels.

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