EUR/USD Price Forecast: Battle around 1.0500 continues

EUR/USD Current price: 1.0493

• The European Central Bank cut the three benchmark rates by 25 basis points each.
• Dismal United States data fueled speculation the Federal Reserve will keep cutting rates in 2025.
• EUR/USD remains vulnerable around the 1.0500 level, risk skews to the downside.

The EUR/USD pair is finishing Thursday little changed at around 1.0500, but not before posting a fresh weekly low of 1.0463 during American trading hours. Speculative interest struggled for clear direction, albeit US Dollar (USD) demand remained strong throughout the day.  

The European Central Bank (ECB) trimmed the three main interest rate benchmarks by 25 basis points (bps), each as expected.  Also, the ECB Monetary policy statement showed some interesting changes. Policymakers removed the word “restrictive” when discussing monetary policy, adding that the “disinflation process is well on track.” Even further, they noted that “most measures of underlying inflation suggest that it will settle at around 2% target on a sustained basis.”

Finally, President Christine Lagarde offered a press conference in which she sounded confident about inflation reaching policymakers’ target goal in 2025, yet added that risks to growth remained tilted to the downside, while risks to inflation are now two-sided.

The United States (US) released Initial Jobless Claims for the week ended December 6, which increased to 242K, worse than the 220K expected. Additionally, the November Producer Price Index (PPI) came in higher than anticipated, rising 3.4% on a yearly basis against the expected 3.2% and the previous 3.1%.

EUR/USD short-term technical outlook

The EUR/USD pair daily chart shows it posted a lower low and a lower high on a daily basis, in line with the dominant bearish trend. The same chart shows a mildly bearish 20 Simple Moving Average (SMA) keeps attracting sellers, providing resistance at around 1.0530. The 100 and 200 SMAs, in the meantime, head firmly south far above the shorter one, also reflecting sellers are in control. Finally, technical indicators offer a mixed picture, with the Momentum indicator advancing modestly above its 100 line, and the Relative Strength Index (RSI) indicator consolidating at around 40.

In the near term, and according to the 4-hour chart, EUR/USD seems poised to extend its slide. A mildly bearish 20 SMA converges with a flat 100 SMA at around 1.0530, reinforcing the relevance of the resistance area. The 200 SMA, in the meantime, gains downward traction above the shorter ones. Finally, technical indicators seesaw within negative levels, which is not enough to suggest an upcoming directional move. Overall, EUR/USD is at risk of falling towards the 1.0400 price zone, as demand for high-yielding assets seems well contained by a cautious mood.

Support levels: 1.0460 1.0410 1.0375

Resistance levels: 1.0530 1.0570 1.0625