Daily Price Outlook
Despite the upbeat Eurozone Industrial Production data, the EUR/USD currency pair struggled to maintain its bullish momentum and shifted bearish around the 1.0311 level, hitting an intra-day low of 1.0287.
The downward shift could be attributed to cautious market sentiment ahead of the release of key US economic data.
Investors are eagerly awaiting the US Consumer Price Index (CPI) for December, due at 13:30 GMT, which will likely have a significant impact on market expectations for the Federal Reserve’s monetary policy.
Apart from this, the Euro faced pressure as investors adopted a wait-and-see approach before the return of President-elect Donald Trump to the White House.
Market participants are concerned that higher import tariffs under his administration may hurt Eurozone exports, making them more expensive for US buyers.
This uncertainty over trade policies contributed to the Euro’s weakness against the Dollar on Wednesday. As a result, the EUR/USD pair is consolidating near the 1.0300 level, reflecting the cautious mood among investors as they monitor developments on both sides of the Atlantic.
EUR/USD Struggles to Gain Momentum Amid Economic Concerns and US Trade Uncertainty
On the EUR front, the Euro remains weak against its major peers on Wednesday. Investors are cautious as they await the return of President-elect Donald Trump to the White House.
Meanwhile, the concerns are rising that his administration may introduce higher import tariffs, which could negatively affect Eurozone exports, making them more expensive for US importers. This uncertainty is putting pressure on the Euro, causing it to underperform.
In addition, worries about Eurozone economic growth and the potential for further interest rate cuts from the European Central Bank (ECB) are contributing to the Euro’s weakness.
The ECB has already cut its Deposit Facility rate by 100 basis points in 2024, and further rate cuts are expected.
ECB Chief Economist Philip Lane mentioned that inflation in the services sector is likely to decrease in the coming months, which could bring inflation closer to the ECB's 2% target.
However, some ECB policymakers, like Austrian Central Bank Governor Robert Holzmann, believe that the path to lower rates may not be as straightforward as it seems.
Holzmann pointed out that core inflation is still relatively high, and energy-related issues could complicate the ECB's decisions.
On the economic data front, Eurozone industrial output showed steady performance in November, with a slight 0.2% month-on-month increase.
This was slightly below the expected 0.3% rise, but it was consistent with the previous month’s performance.
However, the annual rate of industrial production dropped by 1.9% in November, which was a larger decline compared to October's 1.1% fall, in line with market expectations.
The combination of cautious investor sentiment, concerns over higher US import tariffs, and expectations of further ECB rate cuts is weighing on the Euro, leading to a weaker EUR. This is limiting EUR/USD's upside potential, keeping it near the 1.0300 level.
EUR/USD – Technical Analysis
EUR/USD is trading at $1.03006, up 0.07%, as the pair consolidates below the critical pivot point at $1.03187. This level marks a key threshold for market direction.
The 50-day EMA at $1.03032 reinforces near-term resistance, aligning with a descending trendline. Immediate resistance stands at $1.03187, with further levels at $1.03683 and $1.04338. A failure to breach these levels could invite selling pressure.
On the downside, immediate support lies at $1.02392, followed by $1.01867 and $1.01288. A break below $1.02392 could open the door for further declines toward the $1.01867 level, intensifying bearish momentum.
The pair is currently trading within a downtrend, with lower highs and lows indicating continued bearish sentiment. The risk-to-reward setup favors selling at $1.03187, targeting $1.02392, with a stop loss at $1.03683.
This scenario presents a potential profit of $795 per standard lot against a risk of $496. The alignment of technical resistance levels with a bearish trendline further validates the downside bias.
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