The EUR/USD currency pair experienced a modest gain of 0.12% late on Tuesday during the North American trading session, closing at 1.1625 after rebounding from daily lows of 1.1591. This uptick is attributed to an improved risk appetite among investors, buoyed by expectations of a potential Federal Reserve rate cut in December, coupled with persistent inflationary pressures in the Eurozone which continue to support the Euro.
In the financial markets, Wall Street concluded the session positively, while the cryptocurrency sector showed signs of recovery. The Dollar weakened against a basket of currencies following comments from US President Donald Trump during a press conference, where he mentioned Kevin Hassett as a “potential” candidate for the next Fed Chair position.
The economic landscape in the US has been shaped by a light economic docket, prompting traders to assess Monday’s ISM Manufacturing PMI report, which indicated that manufacturing activity dipped further in November. Specifically, it reported a contraction for the ninth consecutive month, with the employment sub-index falling to 44, while prices paid rose slightly, signaling growing inflationary pressures.
Investor sentiment is influenced by money markets, which are currently pricing an 87% chance of a 25 basis points rate cut by the Fed in December—a development regarded as favorable for the Euro’s performance against the Dollar. Meanwhile, Eurozone inflation data presented a mixed picture. The preliminary reading of the Harmonized Index of Consumer Prices (HICP) showed an uptick to 2.2% year-on-year in November, up from 2.1% in October, despite expectations that it would remain unchanged. The core HICP figure remained stable at 2.4%, slightly below anticipated increases.
However, uncertainties loom over the Euro, primarily due to ongoing geopolitical tensions in Eastern Europe. Russian President Vladimir Putin has publicly dismissed European demands as unacceptable and declared Russia’s readiness to engage militarily if a conflict escalates.
Upcoming economic indicators from the Eurozone include HCOB Flash PMIs for November, the Producer Price Index, and speeches from European Central Bank policymakers. Concurrently, the US economic calendar includes S&P and ISM Services PMIs as well as job market metrics like Challenger Job Cuts and Initial Jobless Claims scheduled for Thursday.
In terms of currency performance this week, the Euro has shown resilience against various major currencies, demonstrating strength especially against the British Pound and registering positive changes against the Japanese Yen and the Canadian Dollar.
On a technical analysis front, the EUR/USD remains consolidated for the third consecutive day, inching toward key resistance levels formed by the 50- and 100-day Simple Moving Averages between 1.1610 and 1.1643. Despite the recent attempts to rally, indicators suggest that momentum among buyers is waning, highlighted by a flattened Relative Strength Index (RSI). Should the EUR/USD drop below 1.1600, immediate support could be found at the 20-day SMA at 1.1576, followed by further support around 1.1500 and the 200-day SMA at 1.1448.
With the Euro as the primary currency for 20 European Union member states, it remains the second most actively traded currency globally. The European Central Bank, headquartered in Frankfurt, is tasked with monetary policy and interest rate adjustments, which significantly impact the Euro’s valuation. The current economic indicators and geopolitical developments thus play a critical role in determining the future trajectory of the EUR/USD pair.
