Technical Analysis

EUR/USD Price Analysis – Dec 27, 2023

By LonghornFX Technical Analysis
Dec 27, 20234 min

Daily Price Outlook

The EUR/USD pair failed to stop its downward trend and remained well offered around below the 1.1040 level. However, the reason for its sluggish movement could be attributed to the lack of any major data. Meanwhile, the downward trend was further bolstered by the European Central Bank (ECB) left its benchmark interest rates unchanged at its last meeting of the year. In contrast to this, the bearish US dollar, pressured by the dovish fed stance, was seen as one of the key factor that cap further losses in EUR/USD pair.

Federal Reserve's Inflation Data and Rate Cut Signals: Potential Impact on EUR/USD Pair

It is important to mention that the Federal Reserve's preferred measure of inflation, the Core Personal Consumption Expenditures Price Index (PCE), went up by 3.2% compared to last year, slightly below the expected 3.3%. Looking at the monthly changes, the Core PCE increased by 0.1%, falling short of the expected 0.2%.

At the recent December meeting, the Federal Open Market Committee (FOMC) decided to keep interest rates unchanged and hinted at the possibility of three rate cuts in 2024. This suggests that the Fed is closely monitoring economic conditions and considering adjustments in the coming year.

Therefore, this news of the Federal Reserve maintaining interest rates and indicating potential rate cuts in 2024 could influence the EUR/USD pair by affecting the overall sentiment and dynamics in the currency market.

ECB's Cautious Approach and Optimistic Statements: Potential Support for the Euro and EUR/USD Pair

Furthermore, the European Central Bank (ECB) wrapped up the year by keeping its benchmark interest rates unchanged in the latest meeting. ECB President Christine Lagarde made it clear that the ECB's decisions hinge on data, not influenced by market trends or time pressures.

Adding to this, ECB Vice President Luis de Guindos mentioned that it's too early to consider easing monetary policy. He also expressed confidence that the Eurozone won't experience a technical recession. These more optimistic statements from the ECB could potentially boost the Euro (EUR) and limit the downside for the EUR/USD pair. In simpler terms, the ECB is taking a cautious approach, considering economic data rather than rushing into policy changes, and this stance might support the Euro in the currency market.

Therefore, the ECB's decision to maintain interest rates, coupled with optimistic statements, will likely bolster the Euro (EUR) and mitigate downward pressure on the EUR/USD pair, supporting the Euro in currency markets.

EUR/USD Price Chart – Source: Tradingview
EUR/USD Price Chart – Source: Tradingview

EUR/USD - Technical Analysis 

In the realm of forex trading, the EUR/USD pair remains a critical focus for investors. On December 27, this currency pair exhibits a subtle yet positive change, trading at 1.10447, marking a slight increase of 0.02%. The currency pair's stability is noteworthy, especially considering the current global economic landscape.

The technical analysis of EUR/USD reveals that the pair's pivot point is currently at $1.1044. Investors are closely monitoring resistance levels at $1.1061, $1.1106, and $1.1152. On the support side, key levels are at $1.0981, $1.0937, and $1.0891. These price points are significant for traders as they navigate the forex market's fluctuations.

The Relative Strength Index (RSI) for EUR/USD is at 66, hovering in the bullish sentiment territory without reaching overbought conditions. This suggests a moderately strong buying interest in the market. Furthermore, the pair's price is above the 50-Day Exponential Moving Average (EMA) of $1.0967, reinforcing a short-term bullish trend. This positioning above the EMA is a positive sign for potential upward momentum.

In terms of chart patterns, an upward trendline is supporting the ongoing uptrend in EUR/USD. This pattern indicates a potential continuation of bullish momentum in the short term.

Overall, the trend for EUR/USD appears to be bullish, particularly above the current EMA level. In the short term, it is anticipated that the pair may test its resistance levels. Traders considering entry into the EUR/USD market might contemplate a buy limit at 1.10272, with a take-profit target at 1.10830 and a stop loss at 1.09733.

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