EUR/USD Current price: 1.0517
- The United States Consumer Price Index met expectations in November.
- The European Central Bank is set to announce rate cuts on Thursday.
- EUR/USD is technically bearish and may fall towards 1.0440.
The EUR/USD pair traded with a soft tone throughout the first half of the day, sliding a handful of pips below the 1.0500 mark ahead of critical United States (US) data. The US Dollar (USD) found demand amid a souring market mood as reflected by the poor performance of Asian equities and mounting caution ahead of central banks’ announcements, as most major ones will unveil their monetary policy decisions these days.
Without macroeconomic data coming from the Eurozone, the focus was on the US Consumer Price Index (CPI). The index rose by 2.7% on a yearly basis in November. Compared to the previous month, the CPI increased 0.3%, while the annual core reading printed at 3.3%. All figures matched the market’s estimates, pushing the US Dollar lower as data fell short of twisting the Federal Reserve’s (Fed) hand, scheduled to announce its monetary policy decision next week. The central bank is widely anticipated to trim the benchmark interest rate by 25 basis points (bps), with the CME FedWatch Tool showing the odds for such action at roughly 97%.
The focus shifts now to the European Central Bank (ECB), which is set to trim interest rates on Thursday by 25 bps. Speculative interest will pay close attention to President Christine Lagarde’s words and how concerned she seems about economic progress.
EUR/USD short-term technical outlook
The US Dollar trimmed early gains unevenly across the FX board, with EUR/USD flirting with daily highs in the 1.0530 region amid a better market mood. Still, the bullish potential seems limited. In the daily chart, the pair remains below a bearish 20 Simple Moving Average (SMA), while the 100 and 200 SMAs gain downward traction well above the shorter one. Technical indicators, in the meantime, offer mixed signals as the Momentum indicator aims to advance just above its 100 line, while the Relative Strength Index (RSI) remains soft at around 42.
In the near term, and according to the 4-hour chart, EUR/USD is bearish. A flat 100 SMA provides resistance, while the 20 SMA gains downward traction above it. Finally, technical indicators remain within negative levels, with modest yet clear downward slopes. A break through the daily low should favor a downward extension towards the 1.0440 first, en route to the 1.0400 region afterwards.
Support levels: 1.0485 1.0440 1.0400
Resistance levels: 1.0560 1.0625 1.0660
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