The euro's exchange rate against the rest of the other major currencies has suffered a strong setback. Thus, it’s due to growing expectations that the European Central Bank will be the first among global central banks to cut interest rates next year.
Accordingly, it was natural for the price of the currency pair EUR/USD to move through strong selling operations that pushed it last week towards the 1.0723 support level, its lowest in nearly a month. Recently, EUR/USD closed the week’s trading stable around the 1.0757 level, where bears still have the strongest control. Therefore, stronger than expected US jobs numbers at the end of the week increased the suffering of the EUR/USD pair and it ended the week's trading on a negative note.
What is expected for the euro price in the coming days?
This week, the EUR/USD pair will have an important date with the announcement of US inflation numbers and the announcement of the policies of both the US Federal Reserve and the European Central Bank. Clearly, all of these are important and influential events that may change views regarding the future of the euro/dollar in 2024. Meanwhile, it is possible that the EUR/USD will regain some of its lost gains if the European Central Bank this week opposes rising expectations for an interest rate cut. In this regard, economists at Commerzbank say: The ECB “will seek to limit market expectations of faster interest rate cuts” as inflation will only fall to the 2.0% target in 2025.
Moreover, the price of the euro has declined in recent weeks with the market moving forward the timing of the first reduction to April. Consequently, that increase expectations regarding the total number of reductions that will take place in 2024.
Furthermore, responding opens the door to a degree of recovery. Overall, if the ECB succeeds, the euro price may recover some of its recent losses as markets reduce the odds of an interest rate hike in April. Also, markets moved the timing of the first interest rate cut forward to April after Eurostat said euro zone inflation fell to 2.4% year-on-year in November. Thus, it is putting on the cusp of the 2.0% target, much earlier than expected. Also, this was accompanied by a decline in the euro/dollar exchange rate from the 1.10 resistance in late November to 1.0760 at the time of writing this report. In fact, the markets felt that their prediction of early cuts was correct after Isabel Schnabel, one of the most influential members of the European Central Bank, said that the decline in inflation was “significant”.
EUR/USD technical Analysis Today:
According to the performance on the daily time frame chart below, the general trend for the EUR/USD currency pair remains bearish. As we mentioned before, the psychological support level of 1.0800 will remain the key to more bears’ control over the trend. Therefore, this performance will be on an important date with an exciting trading week led by the announcement of a policy update for both the US Federal Reserve and the European Central Bank and stronger expectations to keep interest rates unchanged. Obviously, the policy statement of these banks will be important and a reaction for markets and investors to anticipate the course of policy during the new year 2024. Nearby, the bank that hints at the possibility of an imminent reduction, its currency will suffer a severe setback. Currently, the euro price is closest to testing stronger support levels, the most important of which are currently 1.0710, 1.0650, and 1.0580, respectively. therefore, that’s sufficient to push all technical indicators towards strong saturation levels for selling.
On the other hand, over the same period, a return to the psychological resistance level of 1.10 will be important in changing the current outlook to bullish. Finally, we expect the currency pair to remain on its current path until the reaction to important data and events during this week.
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