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Focus on Seasonal Fluctuations in Positions
Central Bank
Summary:
Due to the strengthening of the U.S. dollar and concerns regarding the direction of the European Central Bank's (ECB) policies, the EURUSD is under pressure. The interest rate differential between the Federal Reserve and the ECB is a critical factor to monitor. The market anticipates that the rate cuts in the eurozone will exceed those in the UK and the U.S., with Friday's PMI data being particularly noteworthy.
Buy
TradingEURUSD
EXP
1.04474
Entry Price
1.07600
TP
1.03200
SL
1.04072 -0.00656 -0.63%
0
Point
Flat
1.03200
SL
CLOSING
1.04474
Entry Price
1.07600
TP
Fundamentals
At the beginning of this week, U.S. dollar bulls continued to hold their ground; previously, there were indications that the U.S. dollar might weaken. However, so far, this prediction has proven to be incorrect, as the declines during the Asian session were immediately erased in the European session.
The Eurostat released a revised version of the October Harmonized Index of Consumer Prices (HICP) inflation data, confirming that the eurozone's inflation rate for October stands at 2.0% YoY, up from 1.7% YoY in September. The core Consumer Price Index (CPI), which excludes volatile components such as energy, food, alcohol, and tobacco, remained steady at 2.7% YoY.
The overall inflation rate for the EU is 2.3%, slightly higher than the 2.1% recorded in September. There is significant variation in inflation rates among member states.
The currency market anticipates that the ECB will implement a more significant rate cut compared to the U.S. and the UK, with this divergence notably accelerating since Trump's election victory. There has been a scarcity of available data since then, so if the interest rate differential continues to widen, the market may not be surprised.
According to data from the London Stock Exchange Group, the currency market currently estimates a 77% probability that the ECB will reduce rates by 25 basis points in December, and a 23% probability of a 50 basis point cut. The results of the purchasing managers' survey to be released on Friday "could be a crucial piece in solving the puzzle," thereby increasing the likelihood of a more substantial rate cut by the ECB.
Technical Analysis
The EURUSD continues to face selling pressure, with trading prices dipping below 1.0600 on Tuesday. As long as the support level at 1.0760 turns into a resistance level, the outlook remains bearish.
On the downside, if the price stabilizes at 1.0495, it will recover from the drop from 1.1213 to the support level of 1.0447, and then potentially decline to the critical Fibonacci level at 1.0404.
Indeed, the U.S. dollar is also at a crucial juncture, requiring a breakout in a significant upward range relative to the euro, but positioning may pose the greatest threat to the U.S. dollar at this time. Although we may hear about seasonal fluctuations in the U.S. dollar again, historically, the U.S. Dollar Index has declined in 8 out of the last 10 Decembers and has experienced a continuous decline for the past 7 Decembers. One must question whether this trend will persist. It is recommended to focus on testing the market.
Trading Recommendations
Trading Direction: Buy
Entry Price: 1.0448
Target Price: 1.0760
Stop Loss: 1.0320
Deadline: December 5, 2024 23:55:00
Support: 1.0496, 1.0448, 1.0430
Resistance: 1.0606, 1.0664, 1.0681
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