EUR/USD surges over 1.1100 as markets continue to bet on Fed rate cuts

EUR/USD etches in new December high heading into the yearly rollover.
US economic data continues to soften, markets lean further into Fed rate cut bets.
After a 6.5% rally, the EUR/USD is less than 1.5% away from 2023’s high bid of 1.1275.

Joshua Gibson FXStreet

The EUR/USD is gaining ground in thin post-holiday markets as investors gear up for the new year and head towards 2024 with sentiment leaning notably risk-on, pushing the US Dollar (USD) down once more in the last partial trading week of the year.

Broad-market risk appetite is singularly focused on Federal Reserve (Fed) rate cut expectations, with investors currently piling into bets that the Fed will begin the next rate-cutting cycle as soon as next March.

Markets shrug off EU headlines to lean further into rate cut bets

Despite deepening cracks in the European Union and lopsided growth figures pointing towards recession across the Eurozone, markets are bidding the Euro (EUR) higher in the partial post-holiday trading week. Italy’s government is expected to reject reforms to the European Stability Mechanism, with Italian Economic Minister Giancarlo Giorgetti stating that there is no need for additional budget adjustments in order to comply with new EU fiscal policy rules. The Italian Economic Minister’s comments appear to be at odds with the fact that the overwhelming majority of Eurozone economies are currently overshooting EU debt and spending restrictions, with the gap only expected to widen in 2024 as European economies grapple with a looming economic downturn.

Declining economic macro indicators from the US are underpinning risk appetite, as economic softness from the US accelerates market bets of faster, longer, and deeper rate cuts from the US Federal Reserve.

The Richmond Fed Manufacturing Index for December printed -11 versus the forecast -7, backsliding even further from November’s -5 print.

Thursday will bring a fresh round of US data with Initial Jobless Claims for the week into December 22 expected to tick upwards from 205K to 210K. US Pending Home Sales are expected to rebound slightly in November, forecast to gain 1% after October’s -1.5% backslide.

EUR/USD Technical Outlook

The Euro jumped on Wednesday as broad-market flows pull down the US Dollar, sending the EUR/USD to a near-term high of 1.1120, extending recent bullish action further into the top end with the pair trading well above the 200-hour Simple Moving Average (SMA) near 1.0980.

Wednesday’s EUR/USD gains puts the pair into its highest prices since late July, and the pair has climbed nearly 6.5% from October’s bottom bids of 1.0450.

On the daily candlesticks the EUR/USD is threatening to tip even deeper into overbought territory, extending from the 200-day SMA near 1.0850 and closing in the green for all but two of the last 12 consecutive trading days.

EUR/USD Hourly Chart

EUR/USD Daily Chart

EUR/USD Technical Levels

EUR/USD

Overview
Today last price	1.1113
Today Daily Change	0.0071
Today Daily Change %	0.64
Today daily open	1.1042

Trends
Daily SMA20	1.0896
Daily SMA50	1.0798
Daily SMA100	1.0756
Daily SMA200	1.084

Levels
Previous Daily High	1.1045
Previous Daily Low	1.1009
Previous Weekly High	1.104
Previous Weekly Low	1.0892
Previous Monthly High	1.1017
Previous Monthly Low	1.0517
Daily Fibonacci 38.2%	1.1031
Daily Fibonacci 61.8%	1.1023
Daily Pivot Point S1	1.1019
Daily Pivot Point S2	1.0996
Daily Pivot Point S3	1.0983
Daily Pivot Point R1	1.1055
Daily Pivot Point R2	1.1068
Daily Pivot Point R3	1.1092

Author

Joshua Gibson

FXStreet

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

AUD/USD flirts with 0.7000, lowest since early August amid bullish USD

AUD/USD hits a fresh low since early August during the Asian session on Friday and looks vulnerable near 0.7000 after breaking below the 200-day SMA overnight. Against the backdrop of the hawkish Fed, a two-day rally in oil prices revives inflation fears and continues to push US bond yields to multi-year highs. Adding to this, geopolitical risks lift the US Dollar to a two-month high, overshadowing RBA rate hike bets and weighing on the pair.

USD/JPY pulls back from three-week high after failing near 159.00

USD/JPY edges lower during the Asian session on Friday, stalling its recent strong move to a three-week high of 159.00 as Japanese Yen bears turn cautious amid intervention fears. Meanwhile, the US Dollar retains a strong bullish undertone as the Fed's hawkish outlook and oil-driven inflation fears continue to push US bond yields to multi-year peaks. Furthermore, the BoJ's dovish rate hike last week might cap JPY and support spot prices.

Gold treads water below $4,300

Gold grabs some buying attention and advances marginally at the end of the week, partially retracing the weekly decline, although it is still navigating below the key $4,300 mark per troy ounce. The fresh selling bias on the Greenback and the modest decline in US Treasury yields appear to support the humble advance in the precious metal.

Crypto Today: Bitcoin and Ethereum edge lower, XRP extends recovery as macro headwinds weigh

The broader cryptocurrency market is consolidating on Friday, with Bitcoin paring losses slightly above $84,000. Ethereum declines in tandem with BTC. Ripple (XRP), meanwhile, paints a different picture.

Fed vs BoJ: Both hiked. The market only believes one of them – and the chart shows which

The Federal Reserve (Fed) and the Bank of Japan (BoJ) have just done something remarkably similar. Both central banks raised interest rates by 25 basis points (bps) last week, both are confronting inflation risks, and both signal that future decisions will depend on incoming economic data.

Fed vs BoJ: Both hiked. The market only believes one of them – and the chart shows which

The Fed and the BoJ have just done something remarkably similar. Both central banks raised interest rates by 25 bps last week, both are confronting inflation risks, and both signal that future decisions will depend on incoming economic data.