CFD Trading Rate Euro vs US Dollar (EURUSD)

Chancellor Scholz had called for a vote of confidence on Wed and the Bundestag will vote later today. To survive the vote, Scholz would need to receive the support of an absolute majority of 367 votes. EUR was last at 1.0513 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note

Risks are modestly skewed to the upside

“In the event, Scholz fails, then Germany is likely to make way for elections on 23 Feb 2025. Far-right AfD is calling for Germany to leave the European Union, the EUR and Paris climate deal as the party prepares for early elections in Feb-2025. The concern here is the explicit language to quit EU unlike its manifesto ahead of the European parliament elections previously in Jun-2024.”

“EUR was a touch firmer, despite Moody’s downgrade of French rating. President Macron has appointed François Bayrou as the new PM of France. The far-left party La France Insoumise has announced it will launch a no-confidence vote to bring down PM Bayrou while other parties appear less aggressive and have laid down conditions for their support. Ongoing political uncertainties in France, Germany may weigh on EUR but like we had flagged, these are already known unknowns and for EUR to push lower, a new catalyst is required (i.e. a hawkish Fed, etc.).”

Mild bullish momentum on daily chart is intact while RSI rose. Risks are modestly skewed to the upside. Resistance here at 1.0540 (21 DMA, 23.6% fibo retracement of Oct high to Nov low), 1.0610 and 1.0670 (38.2% fibo). Support at 1.0460, 1.0410 levels.

• EUR/USD gains slightly to near 1.0515 ahead of the preliminary PMI data of both the Eurozone and the US for December.
• The ECB is expected to cut interest rates further by 100 bps next year.
• Investors will keenly focus on the Fed’s dot plot for fresh interest rate projections in the US.

EUR/USD ticks higher to near 1.0515 in Monday’s European session ahead of the HCOB Eurozone preliminary Purchasing Managers’ Index (PMI) data for December on both sides of the Atlantic. The PMI report is expected to highlight the divergent fortunes of the Eurozone and US economies, with analysts expecting that overall business activity contracted faster in the Eurozone due to a decline in both manufacturing and service sector output while continuing to expand in the US. This scenario supports more interest rate cuts from the European Central Bank (ECB) and weighs on the Euro (EUR).

The ECB cut its Deposit Facility rate by 25 basis points (bps) to 3% on Thursday, accumulating a total of 100 bps interest rate reductions this year. Given that Eurozone inflation has come under control and officials are worried about growing economic risks, market participants expect the ECB to deliver another 100 bps reduction in its key borrowing rates by June 2025.

On Friday, a significant number of ECB policymakers backed further policy easing and a gradual move towards the neutral rate, which they expect to be around 2%. French central bank Governor Francois Villeroy de Galhau told France's BFM business radio: “There will be further rate cuts next year." When asked about interest rate projections, he said, "I note that we are collectively rather comfortable with the financial markets' interest rate forecasts for next year."

For more guidance on interest rates, ECB President Christine Lagarde will deliver a keynote speech and participate in a panel at the Bank of Lithuania's event on European economic and political resilience.

On the political front, French President Emmanuel Macron appointed Francois Bayrou as the new prime minister on Friday. He replaced Michel Barnier, who lost a no-confidence vote because he failed to pass the budget, which included tax hikes worth 60 billion Euros to cut the fiscal deficit. Bayrou, who is expected to face similar challenges in his administration, is scheduled to meet leaders of the Far Right and left wing on Monday and Tuesday, respectively, according to Reuters.

Daily digest market movers: EUR/USD will be influenced by Fed’s policy this week

• The mild upside in the EUR/USD pair is driven by a slight decline in the US Dollar (USD) amid uncertainty ahead of the Federal Reserve’s (Fed) interest rate decision, which will be announced on Wednesday. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, edges lower but trades close to the key resistance of 107.00.
• The Fed is widely anticipated to cut its key borrowing rates by 25 bps to 4.25%-4.50%. Therefore, investors will pay close attention to the Fed’s Summary of Economic Projections or the so-called “dot plot”, which shows where policymakers see the Federal Funds Rate heading in the medium and longer term. 
• According to a Bloomberg survey conducted from December 6 to 11, a majority of economists expect a less dovish Fed outlook for 2025. Economists see the Fed reducing interest rates three times next year on the assumption that progress in the disinflation process has slowed. The survey also indicated that economists have become more worried about upside risks to inflation than downside risks to employment due to incoming President-elect Donald Trump's policies, including mass deportations, new tariffs, and tax cuts.
• In Monday’s session, investors will focus on the United States (US) S&P Global PMI report for December, which will be published at 14:45 GMT.

Technical Analysis: EUR/USD holds above 1.0500

EUR/USD trades above the psychological figure of 1.0500 but continues to struggle around the three-day resistance near 1.0535. The major currency pair remains below the 20-day Exponential Moving Average (EMA) around 1.0545, suggesting a bearish near-term trend.

The 14-day Relative Strength Index (RSI) revolves around 40.00. The bearish momentum should trigger if the RSI (14) falls below 40.00.

Looking down, the two-year low of 1.0330 will provide key support. Conversely, the 20-day EMA will be the key barrier for the Euro bulls.

• EUR/USD recovers to near 1.0510 in Monday’s early European session. 
• The negative view of the pair prevails below the 100-day EMA with the bearish RSI indicator. 
• The initial support level emerges at 1.0432; the first upside barrier is seen at the 1.0600-1.0610 regions. 

The EUR/USD pair trades in positive territory around 1.0510 during the early European session on Monday. However, the upside for the cross might be limited due to the dovish stance of the European Central Bank (ECB). 

The ECB decided to cut interest rates for the fourth time this year last week and kept the door open to further easing as the Eurozone economy is weighed by political instability at home and the potential Donald Trump’s tariff threats. Later on Monday, traders await the preliminary Eurozone HCOB Purchasing Managers’ Index (PMI) for December for fresh impetus, along with the ECB’s President Christine Lagarde speech. 

Technically, the bearish outlook of EUR/USD remains intact as the major pair is below the key 100-day Exponential Moving Average (EMA). The 14-day Relative Strength Index (RSI) holds below the midline around 43.35, suggesting that further downside looks favorable. 

The first downside target emerges at 1.0432, the lower limit of the Bollinger Band. A breach of this level could see a drop to 1.0332, the low of November 22. Further south, the next contention level is seen at 1.0290, the low of November 30, 2022.

On the bright side, the immediate resistance level is located in the 1.0600-1.0610 zone, representing the upper boundary of the Bollinger Band and the psychological level. Sustained bullish momentum above the mentioned level could see a rally to 1.0764, the 100-day EMA. The additional upside filter to watch is the 1.0800 barrier. 

EUR/USD daily chart

• EUR/USD remains stronger as the Fed is widely expected to deliver a 25 basis point rate cut on Wednesday.
• The CME FedWatch tool suggests full pricing in a quarter basis point cut at the Fed's December meeting.
• The Euro appreciated after President Emmanuel Macron appointed centrist ally François Bayrou as France's Prime Minister.

EUR/USD starts the week by extending its gains, trading around 1.0520 during the Asian session on Monday. This upside could be attributed to the decline in the US Dollar (USD) amid tepid US Treasury yields ahead of the Federal Reserve’s (Fed) interest rate decision set for Wednesday.

The Fed is widely expected to announce a 25 basis point rate cut in its final monetary policy meeting of 2024. Market analysts predict that the US central bank will cut rates while preparing the market for a pause, given the robust US economy and inflation stalling above 2%. According to the CME FedWatch tool, markets are now almost fully pricing in a quarter basis point cut at the Fed's December meeting.

Furthermore, Fed Chair Jerome Powell’s press conference and Dot Plots will be closely monitored. Earlier this month, Powell maintained a cautious tone, stating, “We can afford to be a little more cautious as we try to find neutral.” He indicated that he is not in a hurry to reduce rates.

The Euro gained support after President Emmanuel Macron appointed centrist ally François Bayrou as France's Prime Minister, raising hopes for political stability. Macron had pledged to quickly select a new candidate for the role after Michel Barnier was forced to resign following a confidence vote in Parliament.

On Friday, European Central Bank (ECB) Governing Council member Robert Holzmann said that cutting interest rates solely to stimulate the economy would be a mistake. According to Holzmann, the ECB’s primary responsibility is to ensure price stability, not to fuel economic growth. "Lowering rates now to boost the economy would contradict our current stance," he said, as reported by Bloomberg.

• EUR/USD remains tethered to the 1.0500 mark, rebounding slightly to 1.0498 after testing weekly lows.
• Technical analysis shows the pair is in a delicate balance, with potential to challenge resistance if it sustains above 1.0500.
• Key resistances are set at 1.0530 and 1.0600, while supports loom near 1.0452 and the YTD low of 1.0331.

The EUR/USD remains reluctant to remain far from the 1.0500 figure for the fifth consecutive day, even though the ECB decided to cut rates on Thursday, which pushed the pair toward its weekly low of 1.0452. Nevertheless, buyers stepped in and lifted the exchange rate toward the current level of 1.0498.

EUR/USD Price Forecast: Technical outlook

The EUR/USD daily chart suggests the pair hovers near 1.0500, unable to edge lower decisively and retest year-to-date (YTD) low figures at 1.0331. Even though the pair is carving successive series of lower and lower highs, it might be difficult to extend its downtrend.

Momentum, as measured by the Relative Strength Index (RSI), suggests that buyers gain steam. If they achieve a daily close above 1.0500, this can give them a leg-up.

In that outcome, EUR/USD’s key resistance levels lie at the December 12 high of 1.0530, followed by 1.0600 and last week's peak of 1.0629.

On the other hand, if EUR/USD remains below 1.0500, the major could extend its losses, past 1.0452. A breach of the latter will expose the November 26 low of 1.0424, followed by the November 22 swing low of 1.0331.

EUR/USD Price Chart – Daily

• EUR/USD edges higher on Friday, settling at 1.0495 as it approaches the 20-day SMA.
• RSI rises sharply to 44 but remains in negative territory, indicating improving momentum within a bearish context.

The EUR/USD pair managed a modest rebound on Friday, rising by 0.2% to 1.0495 after testing fresh lows earlier in the week. The pair inched closer to the 20-day Simple Moving Average (SMA) near 1.0550 but failed to breach it, keeping the short-term outlook tilted to the downside.

Technical indicators show signs of stabilization but remain broadly bearish. The Relative Strength Index (RSI) has risen sharply to 44, reflecting improving momentum, though it stays in negative territory, indicating the recovery lacks robust follow-through. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram continues to print decreasing green bars, signaling persistent bearish pressure despite the daily gains.

For the bulls to regain control, EUR/USD must decisively reclaim the 20-day SMA, currently near 1.0550, to shift the outlook to neutral or positive. Until then, the bearish bias remains intact, with immediate support at the psychological 1.0500 level, followed by 1.0480. Failure to hold above these levels could accelerate the downside.

EUR/USD daily chart

EUR fell. ECB rhetoric is dovish (though the extent of dovishness can be debatable), OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Focus next shifts to German politics

“During the press conference, President Lagarde reiterated that the direction for policy was ‘very clear.’ President Lagarde stated that the Council would debate the neutral rate ‘in due course’ but that a discussion remained “premature” at this stage. Lagarde also mentioned that 50bp cut was discussed though 25bp cut decision was unanimous. Growth concerns remain on policymakers’ radar.”

“EUR was at 1.0465 levels. Mild bullish momentum on daily chart is fading while RSI fell. Risks skewed to the downside. Support at 1.0460, 1.0410 levels. Resistance at 1.0525 (21 DMA), 1.0540 (23.6% fibo retracement of Oct high to Nov low), 1.0670 (38.2% fibo).”

“Chancellor Scholz has called for a vote of confidence on Wed and the Bundestag will vote next Monday on 16 Dec. To survive the vote, Scholz would need to receive the support of an absolute majority of 367 votes. But in the event, he fails, then Germany is likely to make way for elections on 23 Feb 2025. Far-right AfD is calling for Germany to leave the European Union, the EUR and Paris climate deal as the party prepares for early elections in Feb-2025. The concern here is the explicit language to quit EU unlike its manifesto ahead of the European parliament elections previously in Jun-2024.”

Euro (EUR) may edge lower; as momentum is not strong, any decline is unlikely to break clearly below 1.0440. In the longer run, slight increase in momentum is not enough to signal a sustained decline; EUR must break clearly below 1.0440 first, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

EUR must break clearly below 1.0440 first

24-HOUR VIEW: “We held the view that EUR ‘is likely to trade in a 1.0475/1.0535 range’ yesterday. However, EUR traded choppily between 1.0462 and 1.0530 before settling at 1.0467 (-0.26%). Despite the erratic price movements, there has been a slight increase in downward momentum. Today, EUR may edge lower, but as momentum is not strong for now, any decline is unlikely to break clearly below 1.0440. Resistance is at 1.0490; a breach of 1.0505 would indicate that the mild downward pressure has faded.”

1-3 WEEKS VIEW: “Our latest narrative was from two days ago (11 Dec, spot at 1.0530), wherein ‘the current price movements are likely part of a range trading phase, expected to be between 1.0465 and 1.0610.’ Yesterday, EUR dipped slightly below 1.0465, touching a low of 1.0462. The slight increase in momentum is not enough to signal the start of a sustained decline. Looking ahead, only a clear break below 1.0440 would suggest that EUR is ready to head lower to 1.0400. The likelihood of EUR breaking clearly below 1.0440 appears slim for now, but it will remain intact as long as 1.0540 is not breached.”

• EUR/USD slips to near 1.0450 after the ECB’s dovish monetary policy decision and a firmer US Dollar.
• The ECB reduced its key borrowing rates by 25 basis points on Thursday, but a few officials also discussed the possibility of a 50-bps cut.
• Fed officials are expected to deliver slightly hawkish remarks on interest rate guidance on Wednesday.

EUR/USD broadly consolidates near 1.0470 in Friday’s European session, staying under bearish pressure after comments from European Central Bank (ECB) President Christine Lagarde on Thursday indicated that more interest rate cuts are in the pipeline, a scenario that has dampened the Euro’s (EUR) outlook. 

After the ECB opted to reduce its Deposit Facility rate by 25 basis points (bps) to 3%, Christine Lagarde highlighted the deteriorating Eurozone growth outlook amid a slowdown in exports and weak business investment, which points to the need for further policy easing. “Surveys indicate that manufacturing is still contracting and growth in services is slowing,” she said, adding that “firms are holding back their investment spending in the face of weak demand and a highly uncertain outlook.”.

The comments from Lagarde also indicated that a handful of ECB officials supported a larger-than-usual interest rate cut of 50 bps, suggesting that policymakers are worried about faltering economic growth. The new ECB staff projections forecast the Eurozone economy to grow by 0.7% in 2024 and 1.1% in 2025, less than previously expected. 

Christine Lagarde was confident about inflation returning to 2% on a sustained basis. “Our projections are telling us that we will be at 2% target in the course of 2025.” When asked about the impact on inflation from higher import tariffs by the United States (US), Lagarde said that these are “probably net inflationary” in the short term, but that “It is going to depend on the scope of the measures and retaliation that is decided, on the rerouting of trade traffic from other parts of the world”.

Going forward, investors will look to commentaries from ECB officials on the interest rate guidance, given that the blackout period is over.

Daily digest market movers: EUR/USD is weighed down by outperforming US Dollar

• EUR/USD is also beaten by firm US Dollar (USD), which has extended its winning spell for the sixth trading day. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, climbs above 107.00. The Greenback gains on expectations that the Federal Reserve (Fed) could deliver a slightly hawkish interest rate guidance after cutting its key borrowing rates by 25 basis points (bps) to 4.25%-4.50% in the policy meeting on Wednesday.
• According to the CME FedWatch tool, traders have priced in a 25-bps interest rate reduction on Wednesday but are confident about leaving them unchanged at 4.25%-4.50% in the policy meeting in January.
• “The recent slowdown in the pace of US disinflation, a lower Unemployment Rate than what the Fed projected in September, and exuberance in US financial markets are contributing to this more hawkish stance,” analysts at Macquarie said.
• A faster-than-expected acceleration in the United States (US) Producer Price Index (PPI) data for November has also added to evidence that the Fed could turn slightly hawkish on the interest rate outlook. The US PPI report showed that the annual headline and core PPI – which excludes volatile food and energy prices – rose by 3% and 3.4%, respectively.

Technical Analysis: EUR/USD trades below 1.0500

EUR/USD trades below the psychological figure of 1.0500. The major currency pair sold off sharply after a mean-reversion move to near the 20-day Exponential Moving Average (EMA) around 1.0580, which is close to 1.0550 at the press time. 

The 14-day Relative Strength Index (RSI) dives below 40.00, suggesting a resumption of the downside momentum.

Looking down, the two-year low of 1.0330 will be a key support. On the flip side, the 20-day EMA will be the key barrier for the Euro bulls.

• EUR/USD struggles near a multi-week low and is pressured by a combination of factors.
• The ECB’s dovish outlook is seen undermining the shared currency amid a bullish USD.
• Bets that the Fed will adopt a cautious stance and rising US bond yields support the buck.

The EUR/USD pair remains depressed during the Asian session on Friday and touches a near three-week low, around the 1.0455 area in the last hour. Moreover, the fundamental backdrop suggests that the path of least resistance for spot prices is to the downside and supports prospects for an extension of the recent downtrend.

The shared currency continues to be undermined by the European Central Bank's (ECB) dovish bias and concerns about the faltering Eurozone economy. In fact, the ECB cut interest rates for the fourth time this year on Thursday and left the door open to further easing in 2025. This marks a big divergence in comparison to expectations for a less dovish Federal Reserve (Fed) and validates the negative outlook for the EUR/USD pair.

The release of the US Consumer Price Index (CPI) and the Producer Price Index (PPI) this week indicated that the progress in lowering inflation to the Fed 2% target has virtually stalled. Furthermore, the growing market conviction that US President Donald Trump's expansionary policies will boost inflationary pressures, suggests that the Fed will adopt a more cautious stance on cutting interest rates going forward.

The outlook remains supportive of a further rise in the US Treasury bond yields and assists the US Dollar (USD) to preserve its gains registered over the past week or so, to a fresh monthly peak touched on Thursday. Apart from this, persistent geopolitical risks stemming from the Russia-Ukraine war and Middle East tensions, along with trade war fears, underpin the safe-haven buck and exert downward pressure on the EUR/USD pair. 

Traders, however, seem reluctant to place aggressive bets and might opt to move to the sidelines ahead of the crucial two-day FOMC monetary policy meeting next week. The outcome will be looked upon for fresh cues about the Fed's rate-cut path, which, in turn, should determine the near-term trajectory for the Greenback and the EUR/USD pair. Nevertheless, the aforementioned fundamental backdrop seems tilted in favor of bearish traders.

• EUR/USD backslid 0.2% on Thursday, shedding the 1.0500 handle.
• The ECB delivered a widely-expected double rate cut on Thursday.
• Tepid data docket awaits Fiber traders on Friday.

EUR/USD backslid a fifth straight trading day on Thursday, falling another one-fifth of one percent and declining further away from 1.0500. Fiber eased lower for for a fifth consecutive trading day after the European Central Bank (ECB) trimmed interest rates by another 25 bps, with broader market sentiment keeping one foot firmly in the Greenback for the day.

The ECB lowered its main reference rates by another quarter-point, trimming market support for the battered Euro. Friday will be a notably quiet note on the data docket, forcing traders to sit and wait until next week’s Purchasing Managers Index (PMI).

US PPI inflation bucked to 0.4% in November, while October’s print was retroactively adjusted to 0.3% from 0.2% MoM. Markets were expecting a print no higher than 0.2% MoM. Core PPI inflation accelerated to 3.4% on an annualized basis, over and above the expected uptick to 3.2% from the previous 3.1% YoY.

Investor sentiment froze in its tracks on Thursday post-PPI inflation print, however market expectations for the Fed’s December 18 rate call have hardened around the 25 bps mark. According to the CME’s FedWatch Tool, rate traders are now pricing in over 98% odds of a quarter-point rate cut when the Federal Open Market Committee (FOMC) convenes in December 18.

EUR/USD price forecast 

The EUR/USD daily chart highlights a persistent bearish trend, with the pair trading below both the 50-day EMA at 1.0679 and the 200-day EMA at 1.0819. This alignment of moving averages points to sustained downside pressure, as sellers have maintained control since the sharp breakdown in early November. The MACD indicator remains in bearish territory, with its signal line hovering below zero, further validating the downward momentum.

The latest candlestick—a small-bodied red candle—underscores the lack of bullish conviction as the pair hovers near the 1.0470 region. This area serves as immediate support, but a clear break lower could expose the year-to-date low around 1.0400. On the upside, resistance is capped by the 1.0500 psychological level, with the 50-day EMA providing a stronger barrier. The overall structure suggests that any recovery attempts are likely to be short-lived unless the pair can reclaim the 1.0600 handle. For now, the bears remain in control, with a clear focus on the downside.

EUR/USD daily chart

• EUR/USD declines further on Thursday, deepening losses below the 20-day SMA.
• RSI remains flat at in negative territory, signaling persistent bearish momentum.
• MACD histogram continues to print decreasing green bars, highlighting fading bullish traction.

The EUR/USD pair extended its downside on Thursday, slipping to 1.0500 and further distancing itself from the 20-day Simple Moving Average (SMA). This sustained loss of key technical support underscores the bearish outlook, with the pair struggling to find any signs of recovery.

Technical indicators remain aligned with the bearish trend. The Relative Strength Index (RSI) is flat at 40, firmly in the negative territory, reflecting ongoing selling pressure and the lack of bullish momentum. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram continues to show decreasing green bars, signaling a persistent fade in bullish traction.

With the pair trading below the 20-day SMA near 1.0530, the downside risks remain prominent. Immediate support lies at the psychological level of 1.0500, followed by the 1.0480 area. To negate the bearish bias, EUR/USD would need to reclaim the 20-day SMA and break above 1.0600 to reinstate a constructive outlook and revive bullish momentum.

EUR/USD daily chart

A 25bp cut is likely a done deal. OIS-implied has priced in back-to-back cuts for 1H next year, taking rates to below 2% in Jun 2025, or even 1.7% in July. The aggressive dovish pricing reflects a recession-driven rate cut cycle rather than a policy normalisation. Last at 1.0513 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Broader price pattern shows an inverted head & shoulders pattern

“Nevertheless, we would pay closer attention to Lagarde’s press conference for clues on how policymakers assess growth outlook to be. On German politics, Chancellor Scholz has called for a vote of confidence yesterday and the Bundestag will vote next Monday on 16 Dec. To survive the vote, Scholz would need to receive the support of an absolute majority of 367 votes. But in the event, he fails, then Germany is likely to make way for elections on 23 Feb 2025.”

“Far right AfD is calling for Germany to leave the European Union, the EUR and Paris climate deal as the party prepares for early elections in Feb-2025. The concern here is the explicit language to quit EU unlike its manifesto ahead of the European parliament elections previously in Jun-2024. Political risks in Europe, risk of dovish ECB and renewed weakness in RMB may continue to weigh on EUR, until we get some clarity. EUR fell, dragged by RMB’s decline yesterday.”  

“Daily momentum is mild bullish but RSI fell. Consolidation likely. Broader price pattern shows a classic formation of an inverted head & shoulders pattern, which is typically associated with a bullish reversal. Neckline comes in at 1.0610/20 levels. Decisive break out puts next resistance at 1.0670 (38.2% fibo), 1.0710 (50 DMA). Support at 1.0460 levels.

Euro (EUR) is unlikely to weaken much further; it is more likely to trade in a 1.0475/1.0535 range. In the longer run, current price movements are likely part of a range trading phase, expected to be between 1.0465 and 1.0610, UOB Group’s FX analyst Quek Ser Leang and Lee Sue Ann note.  

EUR expected to be between 1.0465 and 1.0610

24-HOUR VIEW: “EUR fell to a low of 1.0498 two days ago before recovering. Yesterday, we held the view that ‘there is a chance for EUR to retest the 1.0500 level before a more sustained recovery is likely.’ However, EUR dropped more than expected to a low of 1.0478, closing at 1.0494 (-0.30%). Despite the decline, there is no clear increase in downward momentum, and EUR is unlikely to weaken much further. Today, EUR is more likely to trade in a 1.0475/1.0535 range.”

1-3 WEEKS VIEW: “We indicated yesterday (11 Dec, spot at 1.0530) that ‘the current price movements are likely part of a range trading phase, expected to be between 1.0465 and 1.0610.’ There is no change in our view.”

• EUR/USD moves higher around 1.0520 with investors focusing on the ECB’s monetary policy decision at 13:15 GMT.
• The ECB is almost certain to cut its Deposit Facility rate by 25 bps to 3%.
• No surprise in the US CPI data cemented Fed rate cut bets for next week’s meeting.

EUR/USD gains sharply around 1.0520 in Thursday’s European session ahead of the European Central Bank’s (ECB) interest rate decision, which will be announced at 13:15 GMT. The ECB is widely anticipated to cut its Deposit Facility rate by 25 basis points (bps) to 3% as Eurozone price pressures seem under control and the economy continues to deteriorate. This would be the third straight interest rate cut by the ECB in a row and the fourth of the year.

Therefore, investors will pay close attention to the interest rate guidance from ECB President Christine Lagarde at the press conference after the policy decision to be held at 13:45 GMT. 

"Fundamentals fully justify the December cut and more dovish forward guidance, given the deterioration in the growth picture. Underlying inflationary pressures have eased and risks of further headwinds to growth have increased after the United States (US) election results," Annalisa Piazza at MFS Investment Management said. 

Meanwhile, German Chancellor Olaf Scholz submitted a request for a no-confidence vote on December 16 to the President of the Bundestag, Bärbel Bas, a necessary precursor for holding elections on February 23, 2025, Euronews reported. German government collapsed after Scholz dismissed Finance Minister Christian Lindner, dissolving the three-party coalition.

Daily digest market movers: EUR/USD gains at US Dollar’s expense

• EUR/USD rises as the US Dollar (USD) declines in Thursday’s European session. The US Dollar Index (DXY), which tracks the Greenback value against six major currencies, falls to near 106.40 as US inflation data for November matched expectations, boosting dovish Federal Reserve (Fed) bets. 
• As measured by the Consumer Price Index (CPI), headline inflation accelerated to 2.7% from the prior release of 2.6%, and the core CPI – which excludes volatile food and energy prices – rose steadily by 3.3%.
• US inflation data boosted Federal Reserve (Fed) dovish bets for the policy meeting announcement on Wednesday. According to the CME FedWatch tool, the probability for the Fed to reduce interest rates by 25 bps to 4.25%-4.50% next week has escalated to almost 99%d from 88% on Tuesday.
• In Thursday’s US session, investors will focus on the US Producer Price Index (PPI) data for November and the Initial Jobless Claims data for the week ending December 6.

Technical Analysis: EUR/USD hovers above 1.0500

EUR/USD wobbles above the psychological figure of 1.0500. The outlook of the major currency pair remains bearish as the 20-day EMA near 1.0560 acts as key resistance for the Euro (EUR) bulls.

The 14-day Relative Strength Index (RSI) wobbles near 40.00. Should the RSI fall below this level, a bearish momentum will trigger.

Looking down, the November 22 low of 1.0330 will be a key support. On the flip side, the 50-day EMA near 1.0680 will be the key barrier for the Euro bulls.

• EUR/USD attracts some buyers on Thursday amid subdued US Dollar price action.
• The upside remains capped amid expectations for a more ECB rate cut in 2025. 
• Bets for a less dovish Fed underpin the USD and contribute to capping the major.

The EUR/USD pair edges higher during the Asian session on Thursday and for now, seem to have snapped a four-day losing streak to over a one-week low touched the previous day. Spot prices currently trade around the 1.0500 psychological mark, up just over 0.10% for the day, as traders keenly await the highly-anticipated European Central Bank (ECB) decision before placing fresh directional bets.

The ECB is all but certain to cut interest rates again amid concerns about the faltering Eurozone economy, though investors remain split over the possibility of a larger rate cut. Hence, the focus will remain glued to the accompanying monetary policy statement and ECB President Christine Lagarde's remarks at the post-meeting press conference. Investors will look for signals about further easing in 2025, which, in turn, will play a key role in influencing the shared currency and provide some meaningful impetus to the EUR/USD pair. 

Heading into the key central bank event risk, subdued US Dollar (USD) price action is seen as a key factor lending some support to the currency pair. The near-term bias for the USD remains tilted in favor of bullish traders amid the growing conviction that US President-elect Donald Trump's policies will boost inflation and force the Federal Reserve (Fed) to pause its rate-cutting cycle. This continues to push the US Treasury bond yields higher, which is seen underpinning the USD and capping the upside for the EUR/USD pair. 

Furthermore, concerns about the economic impact of Trump's tariff plans warrant some caution before confirming a near-term bottom for spot prices and positioning for any further appreciating move. Apart from the crucial ECB policy decision, traders on Thursday will take cues from the US macro data – the Producer Price Index (PPI) and the usual Weekly Initial Jobless Claims. This, along with the US bond yields and the broader risk sentiment, will drive the USD and produce short-term opportunities around the EUR/USD pair.

• EUR/USD clattered into the 1.0500 handle on Wednesday.
• Despite a tepid uptick in US CPI inflation, the Greenback is trading steady.
• Euro markets are pulling back slightly ahead of the ECB’s latest rate cut.

EUR/USD fell for a fourth straight day on Wednesday, shedding one quarter of one percent and easing into the 1.0500 handle as the European Central Bank’s (ECB) latest rate call hangs over Fiber traders. US Consumer Price Index (CPI) inflation figures printed tidily at median market forecasts, keeping broader Greenback flows on-balance as investors brace for Thursday’s US Producer Price Index (PPI) print.

The ECB’s latest rate call is set for Thursday, and the rate meeting is widely expected to deliver another quarter-point cut to investors. The ECB’s Main Refinancing Operations Rate is forecast to get trimmed to 3.15% from 3.4%, while the ECB Rate on Deposit Facility is anticipated to decline to a flat 3.0% from 3.25%.

US CPI inflation rose slightly for the year ended in November with headline CPI inflation ticking up to 2.7% YoY from 2.6%, while core CPI inflation held steady at 3.3% YoY. Monthly headline CPI inflation also rose in November, climbing to 0.3% MoM from October’s 0.2%. Despite the overall upswing in main inflation figures, Wednesday’s CPI print was broadly in line with forecasts, keeping investor sentiment tepid.

According to the CME’s FedWatch Tool, rate traders are now pricing in 95% odds of a 25 bps rate cut when the Fed convenes for its last rate call on December 18. Despite the near-term uptick in CPI inflation, investors have decided that the wiggle in reported figures isn’t enough to push the Fed away from delivering one last quarter-point cut to wrap up 2024.

US PPI inflation drops on Thursday, and markets are expecting a similar showing to this week’s CPI print: producer-level inflation is expected to tick higher on the front end of the curve, but expected to remain to close to recent levels overall. Core PPI is forecast to rise to 3.2% YoY, up slightly from the previous period’s 3.1%.

EUR/USD price forecast

Fiber turned into the low side for a fourth straight trading day, declining another 0.25% and wrapping up the day close to the 1.0500 handle. EUR/USD has seen a near-term bullish recovery entirely fizzle out, and the pair is extending downside momentum after flubbing a bullish recapture of the 1.0600 handle.

EUR/USD daily chart

For Euro (EUR), the focus is on ECB tomorrow before Germany’s vote of confidence next Monday. German Chancellor Scholz is expected to call for a vote of confidence today and the Bundestag will vote next Monday on 16 December. Political risks in Europe and concerns of dovish ECB may continue to limit the extent of any EUR’s upmove, until we get some clarity, OCBC’s FX analyst Christopher Wong notes.

Consolidation very much likely

“To survive the vote, Scholz would need to receive the support of an absolute majority of 367 votes. But in the event, he fails, then Germany is likely to make way for elections on 23 February 2025. Far-right AfD is calling for Germany to leave the European Union, the EUR and Paris climate deal as the party prepares for early elections in Feb-2025. The concern here is the explicit language to quit EU unlike its manifesto ahead of the European parliament elections previously in Jun-2024.”

“Tomorrow, ECB meeting takes centerstage. Markets are now pricing just a 25bp cut but OISimplied has priced in back-to-back cuts for 1H next year, taking rates to below 2% in June 2025, or even 1.75% in July. The aggressive dovish pricing reflects a recession-driven rate cut cycle rather than a policy normalization. Nevertheless, we will pay closer attention to Lagarde’s press conference for clues on how policymakers assess growth outlook to be.”

“Daily momentum is mild bullish but RSI fell. Consolidation likely. Broader price pattern shows a classic formation of an inverted head & shoulders pattern, which is typically associated with a bullish reversal. Neckline comes in at 1.0610/20 levels. Break-out puts 1.0670 (38.2% fibo) within reach before next resistance comes in at 1.0750/75 levels (50 DMA, 50% fibo). Support at 1.0540/50 levels (23.6% fibo, 21 DMA), 1.0460 levels.”

• EUR/USD tests region below 1.0500 as the Euro (EUR) weakens, weighed by expectations of further ECB interest-rate cuts.
• The ECB is expected to cut its Deposit Facility rate by 25 bps on Thursday for the third meeting in a row.
• Investors await the US inflation data for fresh interest-rate guidance.

EUR/USD extends its downside around the psychological support of 1.0500 in Wednesday’s European session. The major currency pair weakens due to firm expectations that the European Central Bank (ECB) will reduce its Deposit Facility rate by 25 basis points (bps) to 3% in the policy meeting on Thursday and US Dollar (USD) strength ahead of the United States (US) Consumer Price Index (CPI) data for November. 

As for the ECB, a rate cut would be the third straight one in a row and the fourth this year.

A 25-bps interest rate reduction by the ECB is widely anticipated as policymakers are increasingly convinced that inflation is under control and increasing signs that Eurozone business activity is struggling. Meanwhile, a handful of ECB officials see risks of inflation undershooting the central bank’s target due to potential tariff threats by US President-elect Donald Trump and weak domestic demand.

With traders pricing in an ECB rate cut on Thursday, investors will pay close attention to President Christine Lagarde’s comments in the press conference after the policy decision for fresh interest-rate guidance. Lagarde could deliver somewhat dovish remarks due to political instability in Germany and France and the potential adverse impact of Trump’s tariffs on the export sector.

Daily digest market movers: EUR/USD under pressure ahead of US inflation data

• EUR/USD is down as the US Dollar extends its winning streak for the fourth trading session ahead of the US inflation report, which will be published at 13:30 GMT. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, climbs above 106.50.
• Economists expect annual headline inflation to have accelerated to 2.7% from the October reading of 2.6%. In the same period, the core CPI – which excludes volatile food and energy prices – is expected to have risen steadily by 3.3%. The month-on-month headline and core CPI are estimated to have grown by 0.3%.
• The impact of the inflation data shouldn’t significantly tweak market expectations for the Federal Reserve’s (Fed) likely interest rate action in the policy meeting on December 18 unless there is a dramatic deviation from what’s expected. Recent commentaries from a majority of Fed officials have indicated that they are confident about inflation remaining on a sustainable path towards the bank’s target of 2%.
• According to the CME FedWatch tool, the probability for the Fed to reduce interest rates by 25 bps to 4.25%-4.50% is almost 90%. 

Technical Analysis: EUR/USD struggles to hold 1.0500

EUR/USD struggles near the psychological figure of 1.0500. The outlook of the major currency pair remains bearish as the 20-day EMA near 1.0565 acts as key resistance for the Euro (EUR) bulls.

The 14-day Relative Strength Index (RSI) wobbles near 40.00. Should the RSI fall below this level, a bearish momentum will trigger.

Looking down, the November 22 low of 1.0330 will be a key support. On the flip side, the 50-day EMA near 1.0700 will be the key barrier for the Euro bulls.