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EUR/USD gains as traders anticipate a dovish Federal Reserve

  • EUR/USD climbs 0.24%, buoyed by softer USD amid increasing speculation of an early Fed rate cut.
  • Lower US inflation expectations revealed in New York Fed Survey, alongside Dallas Fed President's remarks, influence market sentiment.
  • Eurozone retail sales show a decline, while German factory orders soften; Germany's trade surplus expands, supporting the Euro.

The Euro (EUR) advances against the US Dollar (USD) in early trading on Monday as the Greenback (USD) weakens, with no fundamental reason, except for traders increasing the odds for the first rate cut of the Federal Reserve by its March meeting. At the time of writing, the EUR/USD is trading at 1.0967, gaining 0.24% after hitting a daily low of 1.0922.

EUR/USD rises above 1.0960 boosted by upbeat German data

The US economic docket is light, though the New York Fed recently revealed its Survey of Consumer Expectations. According to Reuters, “Inflation one year from now is expected to be at 3%, the lowest reading since January 2021, versus a projection of 3.4% in November.” The same report showed estimates for three years are at 2.6%, from 3% in November, while price pressures for five years ahead stood at 2.5% lower than the previous reading of 2.7%.

Over the weekend, Dallas Fed President Lorie Logan said the Fed shouldn’t rule out another rate hike due to the recent easing in financial conditions. She added the US central bank should consider the slow the pace of its balance sheet reduction.

In the meantime, the US Dollar Index (DXY), a gauge of the buck’s value versus a basket of six other currencies, dropped 0.30% and is at 102.10, a tailwind for the EUR/USD pair, which is accelerating its uptrend toward 1.1000.

Aside from this, in the European session, the Eurozone (EU) revealed that November Retail Sales plunged -0.3% MoM as expected but trailed October’s 0.4% increase. Annually based dived sharply from -0.8% to -1.1%, less than the -1.5% projected but worse than the previous release.

In the meantime, in Germany, Factory Orders were softer, while November’s Trade Balance showed a €20.4 billion surplus vs €17.7 billion the previous month, propelled by Exports jumping by 3.7% MoM, while Imports rose by 1.9% MoM. Both figures exceeded projections.

Ahed of the week, the economic docket will feature German Industrial Production and the Unemployment Rate in the Eurozone. On the US front, the release of its Trade Balance and Federal Reserve’s officials speaking led by Michael Barr.

EUR/USD Price Analysis: Technical outlook

The major is bullishly biased, though it faces solid resistance at a multi-month support trendline turned resistance around the 1.0970/80 area. A decisive break is needed so buyers can challenge the 1.1000 figure on its way to testing last month’s high of 1.1139. On the other hand, if the EUR/USD drops below the first support level seen at 1.0950, that would exacerbate a drop towards the 1.0900 figure. Further downside is seen at the 50-day moving average (DMA) at 1.0870.

EUR/USD

Overview
Today last price1.0973
Today Daily Change0.0034
Today Daily Change %0.31
Today daily open1.0939
 
Trends
Daily SMA201.0962
Daily SMA501.0865
Daily SMA1001.0762
Daily SMA2001.0847
 
Levels
Previous Daily High1.0998
Previous Daily Low1.0877
Previous Weekly High1.1046
Previous Weekly Low1.0877
Previous Monthly High1.114
Previous Monthly Low1.0724
Daily Fibonacci 38.2%1.0923
Daily Fibonacci 61.8%1.0952
Daily Pivot Point S11.0878
Daily Pivot Point S21.0817
Daily Pivot Point S31.0756
Daily Pivot Point R11.0999
Daily Pivot Point R21.106
Daily Pivot Point R31.1121

Author

Christian Borjon Valencia

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

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