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EUR/USD Faces Downward Pressure as Dollar Holds Ground Amid Economic Data and Central Bank Moves
Economic
Summary:
EUR/USD faces downward pressure, trading near 1.0530 amid a stronger USD and expectations of a December rate cut from the ECB.
Sell
TradingEURUSD
EXP
1.05165
Entry Price
1.03400
TP
1.05900
SL
1.04964 -0.00121 -0.12%
0
Point
Flat
1.03400
TP
CLOSING
1.05165
Entry Price
1.05900
SL
The EUR/USD pair experienced a pullback during the early Asian trading session on Monday, slipping towards 1.0530. This decline reflects ongoing pressure from the stronger U.S. dollar (USD), despite recent inflation data from the Eurozone and dovish signals from the European Central Bank (ECB). Investors are awaiting critical economic releases later today, including U.S. manufacturing PMI figures and a speech from ECB President Christine Lagarde, both of which could provide further direction for the euro-dollar exchange rate.
The latest inflation data from the Eurozone, released over the weekend, saw the Harmonized Index of Consumer Prices (HICP) rise to 2.3% year-over-year (YoY) in November, up from 2.0% in October. This figure matches market expectations but remains above the ECB’s 2.0% target, adding a layer of complexity to the central bank's monetary policy decisions. Core HICP, which excludes volatile food and energy prices, also increased to 2.8% YoY in November from 2.7% previously, in line with forecasts.
Despite the uptick in inflation, market participants remain convinced that the ECB is headed for further rate cuts. The central bank’s dovish stance has been a key factor weighing on the euro in recent months, as the ECB prepares for a fourth rate reduction in December. The market has priced in a 25 basis point (bps) cut, but expectations for a larger 50 bps reduction have waned following slight improvements in the Eurozone's growth outlook.
This persistent downward pressure on the euro is compounded by concerns about the Eurozone’s sluggish growth, which has led to a growing divergence between the ECB’s dovish tone and the U.S. Federal Reserve’s more cautious approach.
Meanwhile, the U.S. dollar remains supported by the Federal Reserve’s patient stance on interest rates. Fed Chair Jerome Powell’s comments last week emphasized the need for caution in monetary policy, noting that the U.S. economy does not signal an immediate need for rate cuts. Powell stated, "The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully," signaling that the Fed’s policy approach will continue to prioritize economic stability rather than quick rate cuts.
Market expectations for a 25 bps rate cut by the Fed in December currently stand at 65.4%, according to the CME FedWatch Tool. However, the greenback has still benefited from Powell’s cautious tone, with the Fed seemingly more inclined to wait for further data before making any significant moves.
This divergence in central bank policy expectations has provided a tailwind for the USD, which is likely to maintain its strength against the euro in the short term. The market’s preference for the dollar could persist, especially if today’s U.S. manufacturing PMI data points to continued resilience in the U.S. economy.
Technical Analysis
Technically, the EUR/USD pair remains under negative pressure after failing to sustain a break above the 1.0563 mark earlier this morning. The price has completed the formation of a rising wedge pattern, which typically signals a bearish outlook. Given the current market dynamics, the pair is likely to face further selling pressure in the coming sessions, with an initial target at 1.0475. A break below this level would open the door for a deeper decline toward 1.0340, the next significant support level.
Will be closely monitoring the 1.0563 resistance level, as a break above this point could trigger a bullish correction toward 1.0634. However, the overall trend remains tilted to the downside, and the euro’s ability to regain momentum appears limited in the face of both the ECB's dovish outlook and the Fed’s cautious stance.
The expected trading range for EUR/USD today is between support at 1.0440 and resistance at 1.0580.
TRADE RECOMMENDATION
SELL EURUSD
ENTRY PRICE: 1.05165
STOP LOSS: 1.05900
TAKE PROFIT: 1.03400
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