For three consecutive trading sessions, the price of the euro against the US dollar “EUR/USD” has been exposed to profit-taking selling operations, the possibility of which has often been noted. Obviously, after the currency pair tested its highest level in five months at the end of trading in the year 2023, with gains that extended towards the resistance level of 1.1140. Moreover, the current selling operations pushed the price of the Euro/Dollar reached the support level of 1.0892 before settling around the level of 1.0920 at the time of writing the analysis.
According to Forex currency market trading, the price of the US dollar recorded a strong recovery amid a major adjustment in position, a limited repricing of US interest rate expectations from the Federal Reserve, and weakness in stocks amid a more fragile risk environment. Fed Chairman Powell's comments following the US Federal Reserve's December meeting were a major element in undermining the dollar as he indicated that the agenda would move towards lower interest rates during 2024. Also, the committee forecast that three interest rate cuts are likely by the end of 2024 at a year-end rate of 4.6% compared to 5.1% at the September meeting.
Policymakers at the US Federal Reserve concluded last month that inflationary pressures are declining, and the Labor market is slowing. In response, officials chose to leave the key US interest rate unchanged for the third time in a row, and indicated that they expected to cut interest rates three times in 2024. According to the minutes of their meeting held from December 12 to 13, Fed officials indicated in Their interest rate forecasts indicate that a lower benchmark interest rate “will be appropriate by the end of 2024” given “clear progress” towards taming inflation.
But they "stressed the importance" of remaining vigilant and keeping interest rates high "until inflation moves clearly sustainably lower" toward their 2% target. Although, Fed Chairman Jerome Powell indicated in a post-meeting press conference that the Fed was likely finished raising interest rates, the minutes show that Fed officials felt the economic outlook was uncertain enough that Further increases are still “possible”.
Meanwhile, Powell had suggested in his press conference that Fed policymakers discussed interest rate cuts during their meeting, a statement that helped spark the stock market rally. However, over the next few days, some other Fed officials tried to discourage investors from anticipating any imminent cuts. Yesterday's minutes did not provide any explicit reference to the discussion of interest rate cuts.
Technical Analysis of the EUR/USD Pair:
The price of the EUR/USD has now retreated to trade several levels below the 100-hour moving average line. As a result, EUR/USD fell to trade near the oversold levels of the 14-hour RSI. In the near term, and according to the performance on the hourly chart, it appears that the EUR/USD pair is trading within a descending channel formation. Now, the pair has declined to trade near the oversold levels of the 14-hour RSI. Therefore, bears will look to extend current declines towards 1.0886 or lower to 1.0853 support. On the other hand, the bulls will look to pounce on bounces at around 1.0930 or higher at 1.0961 resistance.
In the long term, and according to the performance on the daily chart, it appears that the EUR/USD currency pair is trading within an upward channel. However, the pair has recently pulled back to avoid rising to overbought levels of the 14-day RSI. Therefore, the bears will target extended pullbacks at around 1.0785 or lower at the 1.0669 support. On the other hand, the bulls will look to ride the current series of gains towards 1.1031 or higher to the 1.1143 resistance.
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