- The euro remains volatile but directionless, with holiday-thinned liquidity reinforcing range-bound conditions.
- Resistance overhead continues to attract sellers, while the dollar’s resilience despite softer U.S. inflation keeps downside pressure intact.
The euro has been very noisy during Friday trading as we continue to see a lot of volatility in this pair. That being said, I think it makes a lot of sense that we hesitate here because the market continues to be very sideways and range-bound. And now that we are heading into a holiday week in the form of Christmas, there will be a serious lack of volume.
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With this, I continue to look at the 1.18 level above as a significant resistance barrier. I think that barrier extends to the 1.1850 level, maybe even the 1.1875 level. Signs of exhaustion on short-term rallies for me are still selling opportunities, as although the Federal Reserve is expected to cut rates going forward, the reality is that the euro didn't exactly take off to the upside with any type of momentum after the latest rate cut.
Dollar Strength Undermines the Euro Narrative
And I think you've got a scenario where traders are looking at the possibility that if the Federal Reserve does have to cut, maybe it's because the economy isn't that great. Nonetheless, it's worth noting that the latest CPI numbers that came out this week for the United States were 2.7%, as opposed to the expected 3.1%.
The euro actually fell after that announcement. This tells you a lot about what you should be thinking. In an environment where it suggests that the Federal Reserve may have to cut quicker than people had thought, the US dollar should be shrinking, but it isn't. And that right there goes back to the old adage, watch what they do, not what they say. It looks to me like we are going to remain range-bound, and therefore, I am shorting off of the ceiling just above. To the bottom, I suspect that the 1.15 level offers support, maybe even extending down to the 1.14 level.
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