Euro crawls higher on a risk-on session with Eurozone CPI in focus

• The Euro is crawling higher on Tuesday amid favorable risk sentiment. 
• The US Dollar remains near recent lows despite the hawkish rhetoric by Fed officials.
• In a few moments, the Eurozone CPI will provide some more insight into the ECB´s rate plans.

The Euro (EUR) is showing a moderately positive tone on Monday, with the Dollar languishing near multi-month lows. The recent dovish pivot by the US Federal Reserve (Fed) and investor confidence that the US central bank will start cutting rates in the first quarter of 2024, is fuelling the positive market mood.

This favorable scenario has buoyed the Euro to session highs at 1.0940, from Monday´s lows below 1.0900, as the market awaits the release of November´s Consumer Prices Index (CPI) data.  

The recent hawkish comments by Fed officials, like Chicago Fed President, Austan Goldsbee, who denied any commitment to cut rates soon, have failed to provide a significant impulse to the US Dollar. US bond yields remain near multi-month highs with traders pricing in rate cuts in March, which keep US Dollar bulls in check.

In the calendar today, the final Eurozone CPI reading is expected to confirm that Eurozone inflation continued cooling in November, which endorses the view that the European Central Bank (ECB) has reached its terminal rate.

Daily digest market movers: The Euro is on a moderately positive tone ahead of Eurozone Inflation

• The Euro trades higher on Tuesday, favored by a positive market mood and a weak US Dollar.
   
• ECB´s Villeroy signaled the end of rate hikes and suggested that rate cuts will happen at some point in 2024.
   
• Last week, the ECB kept rates on hold with President Lagarde keeping a hawkish tone in contrast with the Fed´s dovish pivot, that sent the Euro higher against the US Dollar.
   
•  Weak Eurozone Q3 GDP and PMI figures have endorsed the case for an economic slowdown, which has cast doubt on the ECB´s hawkish message, boosting hopes of rate cuts in early 2024.
   
• The escalating tensions in the Middle East and growing concerns about Oil supply disruptions are pushing Crude prices higher. This might weigh on the Euro as it would increase inflation pressures in a moment of weak economic growth.
   
• The US Dollar remains weak, with US bonds depressed as futures markets price a 65% chance of a 25 bps rate cut in March 2024.

Technical Analysis: Euro has found support at 1.0880

Euro reversal from the 1.1010 resistance area, has been contained above the 1.0880 support area and the pair is picking up on Tuesday´s European session, fuelled by a favorable risk environment.

The broader trend remains positive, although the 1.1010 resistance area might be a tough nut to crack. Above here, the next targets would be the August high at 1.1060, and the July 24 and 27 high at 1.1150.

To the downside, a bearish reaction below the December 14 low at 1.0880 and the 4-hour 100 Simple Moving Average (SMA) at 1.0870 would increase bearish pressure towards 1.0825 on the way to 1.0730 lows.