EUR/USD Price Analysis – Nov 13, 2024

Daily Price Outlook

During the European session on Wednesday, the EUR/USD pair continued its downward slide for the fourth straight day, hitting a fresh low of 1.0592 for the year. This drop comes as traders remain cautious ahead of the release of the US Consumer Price Index (CPI) data for October at 13:30 GMT.

Moreover, the Euro has been struggling recently due to several challenges, including fears of a potential trade war between the Eurozone and the US, as well as the collapse of Germany’s three-party government. These issues have kept the EUR/USD on the defensive, adding pressure to the pair.

EUR/USD Under Pressure Amid Trade Tensions and Political Instability

On the EUR front, the shared currency is struggling due to several challenges, keeping the EUR/USD pair on the back foot. The Euro has been underperforming for the past week, with key issues like the potential for a trade war between the Eurozone and the US, and the collapse of Germany’s three-party government weighing on its value.

US President Donald Trump’s campaign remarks about Europe paying a "big price" for not buying enough American exports have raised concerns about a trade conflict, which could hurt the Euro further.

European Central Bank (ECB) official Olli Rehn warned that Europe needs to prepare for a possible trade war, suggesting that if tensions escalate, Europe shouldn’t be caught off guard.

Rehn also mentioned that the ECB’s Deposit Rate could drop to a neutral rate of around 2% by mid-2025, indicating a possible shift in monetary policy. These statements have added to the uncertainty surrounding the Euro’s future performance.

Furthermore, the political situation in Germany has contributed to the Euro’s weakness. Last week, Chancellor Olaf Scholz dismissed Finance Minister Christian Lindner, causing the collapse of Germany’s three-party coalition government.

This led to political instability, with a confidence vote set for December 18 and a snap election planned for February 2025. Investors are now awaiting ECB President Christine Lagarde's speech on Thursday for more clarity on interest rate decisions.

Therefore, the ongoing challenges, including potential trade tensions and political instability in Germany, have weakened the Euro, putting additional pressure on the EUR/USD pair. This uncertainty has contributed to its underperformance, making the pair vulnerable to further declines.

US Inflation Data and Fed Rate Cut Expectations Weigh on EUR/USD

On the US front, the broad-based US dollar is facing caution ahead of the release of the US Consumer Price Index (CPI) data for October, due at 13:30 GMT. The report is expected to show that annual inflation has risen to 2.6% from 2.4% in September, with core CPI, which excludes food and energy prices, increasing by 3.3%. This data will be closely watched by investors as it could affect expectations for the Federal Reserve’s (Fed) monetary policy decisions.

The CPI report will play a key role in shaping market views on whether the Fed will cut interest rates in December. The chance of a 25 basis point (bps) rate cut has dropped slightly to 62% from 70% last week, as investors are starting to think the US economy might improve.

With rising price pressures and President-elect Donald Trump's plans to raise tariffs and lower corporate taxes, inflation could increase, leading the Fed to slow down its rate cuts.

Minneapolis Federal Reserve Bank President Neel Kashkari recently warned that if inflation surprises to the upside, the Fed could reconsider its plans.

He also noted that the current monetary policy is "modestly restrictive," but expects economic growth to continue. Investors will be closely following speeches from other Fed officials on Wednesday for more clarity on future rate decisions.

Therefore, the uncertainty around US inflation data and potential Fed rate cuts has kept the EUR/USD pair under pressure. If inflation rises more than expected, it could reduce the likelihood of a rate cut, strengthening the US dollar and weakening the Euro.

EUR/USD – Technical Analysis

The EUR/USD pair is trading at $1.06110, down by 0.11% for the day, reflecting mild bearish sentiment as it hovers below key resistance levels. The pivot point is established at $1.06285, marking an essential level for intraday traders to watch.

If EUR/USD fails to reclaim this pivot, it could signal further downside pressure. Immediate resistance lies at $1.06568, followed by the next resistance levels at $1.06824, which may act as barriers in any attempted recovery.

On the downside, immediate support is located at $1.05952, with further support seen at $1.05711 and a more critical level at $1.05527, which could potentially limit bearish movement if selling intensifies.

The Relative Strength Index (RSI) stands at 40, signaling bearish momentum but not yet reaching oversold territory, leaving room for additional downside movement. Additionally, the 50-day Exponential Moving Average (EMA) is positioned at $1.06395, above the current trading price, reinforcing a bearish bias as the pair struggles to break through this level.

Traders may consider a potential sell entry below $1.06230, with a target of $1.05950 to capitalize on the bearish momentum. A stop-loss at $1.06458 is recommended to manage risk against unexpected upward moves.

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