Dollar remains on the front-foot ahead of FOMC
The EUR/USD saw a rebound to the $1.05 area after testing liquidity below this month’s earlier low of 1.0460, with traders taking profit following a 5-day losing streak. Although ECB President Christine Lagarde’s comments were not as dovish as expected given the Eurozone’s political and economic challenges, the EUR/USD outlook remains negative. Investors are eagerly anticipating next week, which could be the last important week of the year, as the Fed and other central banks are expected to announce their rate expectations. The broken 1.0500 handle is now the critical technical level to monitor.
Expectations for EUR/USD outlook
This week’s US CPI data revealed no surprises, but PPI came in slightly higher. Traders are confident in their predictions of a rate cut at the Federal Reserve’s final meeting of the year next week, with a 25-basis-point reduction nearly fully priced in. The main question is whether the Fed will pause rate cuts in early 2025 or continue with 25-basis-point reductions at upcoming meetings. Speculation about a possible hawkish cut has increased following Jerome Powell’s comments last month, emphasizing a potential change in approach.
Factors influencing EUR/USD outlook
Upcoming central bank meetings, especially from the US Federal Reserve, Bank of England, and Bank of Japan, will have a significant impact on the EUR/USD outlook. Global PMIs on Monday could influence major FX pairs and indices, with particular attention to Eurozone data. Traders are cautious after the European Central Bank’s rate cut last week, leading to mixed reactions in the markets. Technical analysis points to ongoing pressure on the EUR/USD with key levels to watch for potential movements.
Technical outlook for EUR/USD
The EUR/USD is facing pressure around the key 1.05 level, with the possibility of a bearish signal if it closes below. Bullish traders are awaiting a breakthrough of the 1.06 resistance area for a potential rally. Confirmation is crucial for trading strategies, with a bearish approach favored at resistance levels. Monitoring the pair’s behavior around significant levels will be essential for trading opportunities.
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