EUR/USD Price Analysis – Dec 25, 2023

Daily Price Outlook

The EUR/USD currency pair experienced a consistent upward trajectory, reaching its peak in 18 weeks at 1.1040. However, the reason for its upward trend could be attributed to the bearish US dollar, which was being prssure by the lower-than-expected US inflation figures led investors to anticipate additional rate cuts from the Federal Reserve in 2024.

Impacts of US Economic Indicators on EUR/USD Pair

It's important to highlight that the US Personal Consumption Expenditure (PCE) Price Index, a measure of inflation, didn't meet expectations. The Core Annualized PCE Price Index for the year until November was 3.2%, below the predicted 3.3%, and even lower than October's 3.4%. This has led money markets to expect the Federal Reserve (Fed) to cut interest rates more quickly in 2024.

Investors predict a faster rate of cuts, around 160 basis points, compared to the Fed's projection of 75 basis points by the end of 2024. However, the US Durable Goods Orders beat expectations at 5.4% for November, suggesting the economy might be stronger than anticipated, potentially affecting the extent of future rate cuts.

Therefore, the softer-than-expected US inflation and anticipation of faster rate cuts by the Fed weakened the US Dollar, benefiting the EUR/USD pair. Positive Durable Goods Orders signaled potential economic strength, influencing market sentiment.

ECB's Cautious Stance and Optimism Impacting EUR/USD Dynamics

Moreover, on Thursday, the Vice President of the European Central Bank (ECB), Luis de Guindos, expressed that it's too early to consider easing monetary policy. He assured that the ECB doesn't foresee a technical recession in the Eurozone. De Guindos also mentioned that a fiscal reform deal within the EU would be welcomed as it could reduce market uncertainty.

Meanwhile, ECB Governing Council member Martins Kazaks, on Wednesday, suggested that maintaining current interest rates is necessary for some time. However, he hinted that the first rate cut might happen later than what investors are currently expecting, possibly around mid-2024.

Therefore, the ECB's cautious stance and optimism about avoiding a recession in the Eurozone may strengthen the Euro.

EUR/USD - Technical Analysis 

As Christmas day unfolds, the EUR/USD pair is showing a modest uptick, currently trading at 1.10146, marking a slight increase of 0.02%. This movement comes amidst a complex backdrop of economic uncertainties and shifting market sentiments.

The primary pivot point for the pair is established at $1.0882. Looking ahead, immediate resistance is observed at $1.1020. Should the Euro maintain its upward trajectory, further resistance could be encountered at $1.1143 and $1.1291. On the downside, immediate support lies at $1.0754, with additional safety nets at $1.0606 and $1.0482.

The Relative Strength Index (RSI) stands at 64, indicating a bullish sentiment that is not yet in the overbought territory. This suggests there could be room for further upward movement, although caution is always advised in such volatile markets.

The Moving Average Convergence Divergence (MACD) shows a value of 0.00020 with a signal line at 0.00247. This alignment hints at potential bullish momentum in the near term, suggesting the Euro might continue its upward trend against the Dollar.

Furthermore, an ascending triangle breakout at 1.09901 indicates a buying trend for the EUR/USD pair. This pattern, often associated with bullish momentum, suggests a continuation of the upward trend, provided the pair maintains its stance above this breakout point.

In conclusion, the overall trend for the EUR/USD pair appears to be bullish, especially if it remains above the 1.09901 threshold. In the short term, the pair is likely to test the immediate resistance levels, with a potential to push towards higher resistances depending on the prevailing market conditions and economic data releases.

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