EUR/USD Price Analysis – Dec 23, 2024
Daily Price Outlook
During the European trading session, the EUR/USD currency pair continued its downward trend, struggling to break above Friday’s high of 1.0445. The pair remained under pressure, trading around the 1.0398 level and hitting an intraday low of 1.0387.
Meanwhile, the shared currency faced challenges after European Central Bank (ECB) President Christine Lagarde expressed confidence in the ongoing progress of reducing inflation during an interview with the Financial Times.
Her remarks suggested the ECB might not need to take an aggressive stance on tightening monetary policy, which weighed on the Euro’s performance.
Apart from this, the EUR/USD pair is expected to trade in a limited range this week due to low trading activity in a holiday-shortened period.
With Christmas Eve and Boxing Day falling midweek, thin market volumes have kept the currency pair constrained.
Traders remain cautious, as the holiday season often limits volatility and market opportunities.
EUR/USD Struggles as ECB's Rate Cuts and Inflation Outlook Weigh on Euro
On the EUR front, the currency pair is struggling as the euro continues to underperform. European Central Bank (ECB) President Christine Lagarde expressed confidence in reducing inflation, stating that the ECB is close to reaching its target of a 2% inflation rate.
She mentioned in an interview with the Financial Times that they are nearly at a point where they can declare inflation under control. However, the euro’s weakness is still visible as the market reacts to this cautious optimism.
The ECB has already reduced its Deposit Facility rate by 100 basis points this year and is expected to cut it by another 100 basis points next year.
This is largely due to concerns over the Eurozone's economic risks and the need to keep inflation in check.
Most ECB officials are aligned with the market's expectations for gradual rate cuts until inflation hits the 2% target, which they see as a neutral rate to avoid the risks of inflation falling too low.
Meanwhile, the economic calendar remains light, with investors looking ahead to Tuesday’s US Durable Goods Orders data, which is expected to show a decline of 0.4% in November after a 0.3% rise in October.
US Dollar Steady Amid Slower PCE Growth and Uncertainty Over Fed Rate Cuts
On the US front, the broad-based US dollar is steady after a sharp drop on Friday due to slower-than-expected growth in the US Personal Consumption Expenditure (PCE) Price Index.
The US Dollar Index (DXY), which tracks the dollar against six major currencies, is hovering just below 108.00. Core PCE inflation, which the Federal Reserve (Fed) watches closely, rose by 2.8%, slightly below the expected 2.9%.
Both headline and core PCE inflation increased by 0.1% month-on-month, leading to some uncertainty about whether the Fed will continue with its plans for gradual rate cuts in 2025.
Fed officials are now expecting fewer interest rate cuts next year, mainly due to the slower progress in reducing inflation and uncertainties around President-elect Donald Trump's policies on immigration, trade, and taxes.
Cleveland Fed President Beth Hammack, who voted to leave interest rates unchanged, said she prefers to wait for more evidence that inflation is returning to the 2% target.
Meanwhile, Chicago Fed President Austan Goolsbee mentioned that the uncertainty surrounding Trump’s policies has led to a shift in expectations, projecting fewer rate cuts than initially expected. Monday’s economic calendar is light, but investors will focus on the US Durable Goods Orders data for November, which is expected to show a decline of 0.4%.
EUR/USD – Technical Analysis
EUR/USD is trading at $1.04331, marginally up 0.04%, showing consolidation below the $1.04455 pivot point.
The immediate resistance is seen at $1.04799, with additional hurdles at $1.05318 and $1.05677, which align with Fibonacci retracement levels, suggesting potential for a short-term rally if these levels are breached.
On the downside, immediate support lies at $1.03865, with further levels at $1.03430 and $1.03033 providing a robust safety net.
The RSI at 57 indicates neutral-to-bullish momentum, but the pair is struggling to gain traction above its 50 EMA at $1.04313, signaling a lack of decisive trend direction.
The broader trend remains bearish as long as EUR/USD trades below the $1.04799 pivot point. Sellers dominate the market, with price action reflecting caution amid lingering uncertainty in the Eurozone and USD dynamics.
A move below $1.04449 could accelerate declines toward the $1.03853 take-profit target, while a sustained break above $1.04799 would shift momentum to the upside.
Sell positions are favored below $1.04449, targeting $1.03853, with a stop-loss at $1.04927. Watch for a breakout above $1.04799 to reassess sentiment.
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