The EUR/USD currency pair saw a slight decline on Thursday as the US Dollar (USD) steadied following a weaker performance on Wednesday. However, the near-term outlook for the Euro (EUR) appears somewhat more positive after less-dovish remarks from European Central Bank (ECB) board member Isabel Schnabel in an interview with Bloomberg on Wednesday.
Schnabel downplayed expectations of an aggressive easing cycle by the ECB, asserting that there is no risk of inflation falling below the central bank’s target. She also argued that current ECB stimulus measures do not address the structural challenges facing the Eurozone economy.
Investors are now turning their attention to the upcoming release of the November Harmonized Index of Consumer Prices (HICP) data for Spain, Germany, and six other major Eurozone states, due Thursday. German HICP is expected to show an increase to 2.6% year-over-year from 2.4% in October, though a 0.5% month-on-month contraction is forecasted.
Meanwhile, concerns over a potential drop in Eurozone exports due to new tariffs from US President-elect Donald Trump have eased somewhat. ECB President Christine Lagarde, speaking to the Financial Times on Thursday, suggested that Trump’s lack of clarity on European tariffs could indicate an openness to negotiation. Lagarde also warned that global demand could suffer if tariffs are imposed, making it harder to “make America great again.”
EUR/USD Declines as US Dollar Gains Ground Amid Thin Trading
EUR/USD dipped to around 1.0550 during Thursday’s European session, following a fresh weekly high near 1.0590 on Wednesday. The pair faced pressure as the US Dollar (USD) temporarily regained ground on a light trading day, ahead of the US Thanksgiving holiday weekend. The US Dollar Index (DXY), which tracks the USD against a basket of major currencies, found support around the 106.00 level after a sharp decline the previous day.
Market expectations for the Federal Reserve’s (Fed) actions in December remain a key driver for the Greenback. There is currently a 66% probability of a 25 basis point rate cut, according to the CME FedWatch tool. Despite October’s Personal Consumption Expenditure (PCE) data meeting expectations, the Fed is still seen as likely to lower rates. The core PCE, which excludes volatile food and energy prices, rose by 2.8% annually, exceeding the previous month’s 2.7%.
Technical Analysis: EUR/USD Faces Challenges at 20-Day EMA
EUR/USD struggled to extend Wednesday’s rally above the key resistance level of 1.0600. The current pullback appears to be a mean-reversion move, with the pair potentially heading towards the 20-day Exponential Moving Average (EMA) near 1.0600. Despite this, the broader outlook remains bearish, as all short- to long-term EMAs are declining, signaling a downtrend.
The 14-day Relative Strength Index (RSI) has rebounded after oversold conditions, climbing above 40.0, suggesting that bearish momentum may be easing. However, the downward trend has not yet reversed.
Looking ahead, the November 22 low of 1.0330 remains a key support level for the Euro, while the 50-day EMA near 1.0750 will act as a major resistance barrier.
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