The continued weakness of the US dollar allowed the EUR/USD pair to finally break through the psychological resistance level of 1.1000, which supports the bullish trend of the currency pair. Recently, there was also a catalyst for the breakthrough, as the economic releases from the eurozone, despite the improvement, are still in recessionary areas. Especially, since there is great concern surrounding the recovery of the largest economy in the eurozone – Germany. obviously, the EUR/USD path may remain on its gains until the reaction to US data and statements from US central bank officials this week.
Euro price expectations in the coming days:
The euro-dollar exchange rate continues to show signs of strength, which could see it continue to rise in the short term, according to Fawad Razaqzadeh, an analyst at City Index. Last week witnessed the EUR/USD pair achieving another weekly gain after the significant rise in the previous week, thus maintaining its recent upward bias. It has now managed to hold above the 200-day average for 9 sessions and counting, which is a sign of strength. Therefore, the path of least resistance remains up.
According to Forex currency market trading, the price of the EUR/USD maintained support around the area in which it previously suffered, i.e., around 1.0880 to 1.0900. therefore, the bulls will need to continue defending this area to maintain the upward momentum. The dividing line is at support 1.0825, which is the recent low. Moreover, if the EUR/USD price falls below this level, I expect a correction towards the previous breakout base around 1.0725. shortly, this is not out primary expectation.
Given the recent bullish momentum, EUR/USD seems more likely to move towards and possibly above 1.10 rather than drop below 1.0825. The EUR/USD bullish drift continues as it approaches the 1.10 level, and is now less than 50 pips from this psychological barrier. Clearly, it has been a good month for the EUR/USD pair, as it has risen nearly 450 pips (4.25%) from low to high for the month so far.
As we enter the final week of November, can we extend these gains to 500 points, perhaps paving the way for further follow-on gains in December?
In general, the price of the US dollar is declining against the rest of the other major currencies, as the market becomes increasingly convinced that the next step from the US Central Bank will be to lower interest rates, perhaps as early as the second quarter. In fact, the odds of a May cut are close to 50%, according to CME Group's FedWatch tool. The US dollar fell last week after a significant decline the previous week, when lower-than-expected CPI and Producer Price Index numbers poured cold water on recent hawkish comments from the US Federal Reserve, keeping yields under pressure.
At the beginning of this week, US new home sales data came in below expectations. Also, global stock markets excited by the prospect of central banks adopting a more dovish stance going forward. Meanwhile, with indicators of global inflationary pressures slowly moving back to normal levels around the world. Obviously, this is also helping to keep the dollar under pressure, boosting appetite for other foreign currencies.
Meanwhile, European economic data is beginning to show some signs of stabilization. Last week, for example, witnessed the release of PMI data surprising to the upside, albeit still in contraction territory, while the business climate at the German Ifo Institute rose for the second month in a row.
Investors are looking forward to an important week of data, as inflation numbers will come from both the Eurozone and the United States, as well as GDP and some other macro indicators in the United States. For her part, European Central Bank President Christine Lagarde said on Friday that the battle against inflation is not over yet, although no further interest rate hikes are expected. At the same time, the preliminary estimate for the US gross domestic product in the third quarter is scheduled to be released tomorrow, Wednesday. Furthermore, if there is a significant revision from the initial 4.9% annual growth reported last month, this could impact the trajectory of the EUR/USD pair. The previous estimate exceeded expectations, resulting in a positive response for the US dollar.
Now, the question is whether a similar reaction will occur this time, or whether markets will be more attuned to forward-looking statements, considering that GDP is a few months old.
On another influential level, the core personal consumption expenditures price index is scheduled to be revealed tomorrow, Thursday. As, the headline US CPI fell less than expected, traders are keen to see if this weak inflationary trend will continue in the upcoming PCE numbers. Controversially, this is pivotal to maintaining the belief that the Fed may cut interest rates in the first half of next year. Nearby, the core PCE index is typically the Fed's preferred measure of inflation due to its lower volatility compared to traditional CPI measures.
Therefore, a stronger reading could reduce risk appetite, strengthen the US dollar, and prompt traders to reevaluate their expectations of an earlier-than-expected interest rate cut in 2024.
EUR/USD Analysis Today:
The bullish shift in the EUR/USD is getting stronger and the same resistance has been broken 1.1000 will confirm the strength of the bulls’ control over the trend and support the move towards stronger upward levels. Especially, if the results of the upcoming US economic data are less than expected. Currently, the closest resistance levels for the currency pair are 1.1045 and 1.1120, respectively. With the last level and the one above it, the technical indicators will move towards strong saturation levels for buying. On the other hand, according to the performance on the daily chart below, moving towards the support level of 1.0830 is a threat to the current upward shift.
