Currently, Bulls are trying to push the euro dollar pair EUR/USD towards the psychological resistance level of 1.10 again, which has often confirmed that it is a good opportunity for bulls to control the direction. Technically, EUR/USD pair formed a double top pattern as traders reversed the recent decisions of the European Central Bank and the US Federal Reserve. Also, the euro against the dollar “EUR/USD” has been in the spotlight recently as investors have reacted to key economic figures and events. Moreover, the United States released the latest inflation figures, which showed that prices remained high. According to the Bureau of Labor Statistics (BLS), the main US Consumer Price Index (CPI) fell slightly to 3.0% in November. Additionally, the core inflation rate, which excludes volatile food and energy prices, remained at 4.0%.
Moreover, the other decisive event was when the US Federal Reserve released a relatively pessimistic statement. As expected, the bank decided to leave US interest rates unchanged between 5.25% and 5.50%. Most importantly, the bank signalled three cuts in US interest rates in 2024. As a result, analysts believe that the bank could start these cuts in March if inflation continues to fall. They also see the bank offering more than three interest rate cuts. Therefore, this would be a major change in the position of the US Federal Reserve, which has adopted a very hawkish tone in the past two years. For his part, Governor Jerome Powell has hinted in all his statements at a higher rate for a longer period.
Meanwhile, a major event came when the European Central Bank issued its decision. Like the Federal Reserve, the bank decided to leave interest rates unchanged at 4.25%. However, unlike the Federal Reserve, the European Central Bank signalled that it would keep interest rates high for longer. Also, it pointed out that inflation will remain above target for longer. Therefore, it expects average inflation to be 5.4% in 2023, 2.7% in 2024, and 2.1% in 2025. This was a lower inflation target than the previous estimate. However, there is a possibility that the European Central Bank will now cut interest rates as the economy slows down. According to S&P Global, the numbers for the bloc's manufacturing and services purchasing managers' indices were worse than expected. Recently, they fell to readings of 44.2 and 48.1, respectively. Finally, a reading of the purchasing managers' index (PMI) below 50 indicates a contraction in the sector.
What is expected for the EURO/DOLLAR price in the coming days?
HSBC forecasts show that EUR/USD will head lower as the US Federal Reserve and other central banks may not be able to ease monetary policy as much as markets believe. As a result, HSBC warns that there is too much optimism already expressed by markets, and that the obstacles to maintaining that optimism are now greater.
Over and above that, Stock markets rose, and the dollar fell in the wake of the Federal Reserve's notable policy “pivot” in its December update, as policymakers overlooked market expectations of several interest rate cuts in 2024. Moreover, the “pivot” led to Goldman Sachs increased the number of bets it expects in 2024 from one to five, leading to a cut in the dollar forecast by the bank's forex analysis team. Concomitantly, the latest guidance from the US Federal Reserve did not shake expectations at HSBC, which is looking in the opposite direction.
EUR/USD technical Analysis Today:
As we mentioned before, and according to the performance on the daily chart below, the break of the EUR/USD to the psychological resistance level of 1.1000 will be important to strengthen the bulls’ control over the trend. Accordingly, stronger upward levels will be expected, and the next will be 1.1055 and 1.1120, which confirms the extent of the bulls’ control over the attempts to reverse the trend. On the other hand, over the same period, the return of the EUR/USD price to the support level of 1.0830 will lead to the evaporation of the current upward hopes. Finally, EUR/USD pair will be affected today by the announcement of the German Producer Price Index reading, followed by the US Consumer Confidence reading.
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