EUR/USD Price Analysis – Nov 29, 2024
Daily Price Outlook
During the European trading session, the EUR/USD pair has been facing selling pressure after reaching a fresh weekly high near 1.0580.
This upward momentum faded as the flash Eurozone Harmonized Index of Consumer Prices (HICP) for November showed a month-on-month decline in price pressures, which weighed on the Euro.
At the same time, the US dollar saw a rebound, which pushed the pair back below 1.0600, with the USD regaining some strength in a shortened holiday week.
EUR/USD Faces Pressure as Weak Economic Data Fuels ECB Rate Cut Expectations
On the data front, the flash Eurozone Harmonized Index of Consumer Prices (HICP) data for November showed a drop in price pressures. The monthly headline HICP decreased by 0.3%, while core HICP, which excludes food and energy prices, fell by 0.6%.
This weak data sparked expectations that the European Central Bank (ECB) might cut interest rates by 50 basis points in its December meeting. So far, the ECB has already lowered its Deposit Facility Rate by 75 basis points this year, to 3.25%.
Apart from this, the weak German Retail Sales data for October showed a larger-than-expected decline of 1.5%, after a 1.2% increase in September. Economists had predicted a smaller drop of 0.3%.
On a year-on-year basis, Retail Sales grew by just 1%, far below the expected 3.2% and slower than the previous month's 3.8%. These figures raised concerns about consumer spending and added to the speculation of a potential ECB rate cut.
Meanwhile, ECB officials, like François Villeroy de Galhau, have hinted at the possibility of a large interest rate cut. In his speech on Thursday, he mentioned that the ECB might reduce rates in December, depending on economic data and risks.
Traders are currently expecting the ECB to cut rates by at least 25 basis points in December, and further cuts are anticipated through 2025, pushing the Deposit Facility Rate down to 1.75% by the end of next year.
US Dollar Rebounds as Markets Anticipate Economic and Monetary Policy Shifts
On the US front, the US Dollar rebounded in a holiday-shortened week and the US Dollar Index (DXY), which tracks the USD against six major currencies, recovered from early losses, rising to around 106.00 after dipping to a two-week low of 105.60 on Friday.
However, the rebound began on Monday after US President-elect Donald Trump nominated Scott Bessent, a veteran hedge fund manager, as Treasury Secretary.
Markets expected Bessent to carry out Trump’s economic plans without affecting foreign relations or fiscal policy. In an interview with the Financial Times, Bessent explained that he plans to slowly introduce tariffs and reduce the budget deficit by cutting spending, without causing a big rise in inflation.
On the monetary policy front, experts believe the Federal Reserve (Fed) will be cautious about cutting interest rates, as the core Personal Consumption Expenditures Price Index (PCE) showed increased inflation in October. However, the likelihood of a 25 basis point rate cut in December stands at 66%, with the rest expecting no change.
Therefore, the rebound of the US dollar, driven by expectations of fiscal policy changes and cautious Fed rate cuts, strengthened the USD, putting downward pressure on the EUR/USD pair.
EUR/USD – Technical Analysis
EUR/USD is trading at $1.05697, up 0.17% for the session, as the pair shows signs of sustained bullish momentum above the $1.05590 pivot point. Immediate resistance is positioned at $1.06071, aligning with the next key target of $1.06457.
A breakout above these levels could drive further gains toward $1.06811, signaling continued optimism in the euro.
On the downside, immediate support rests at $1.05269, followed by $1.04983 and $1.04597, with the 50-day EMA at $1.05161 providing dynamic support to the pair. A breach below these levels could shift the sentiment bearish, with increased selling pressure likely if $1.04983 fails to hold.
The RSI stands at 61, indicating moderate bullish momentum without nearing overbought territory, which leaves room for additional upside. The price action suggests a favorable outlook for buyers if the pair sustains its position above $1.05590.
Traders may look to enter long positions above $1.05583, targeting $1.06070, while maintaining a stop-loss at $1.05210 for prudent risk management.
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