EUR/USD: A Dynamic Market As December Starts
The EUR/USD pair is now under a lot of focus as traders prepare for December. The US dollar’s corrective decline seemed to stabilize recently while the Eurozone fundamentals are also under pressure, and therefore, the currency pair is at a crossroads). Since this morning, EUR/USD has been oscillating in a rather constricted trading range – it emerged as a result of the battle between the positive sentiments regarding the euro and the strength of the dollar.
Concerning EUR/USD, the article reveals not only factors which may affect this pair in the nearest future but also compares them to US dollar factors, Euro zone data and technical indicators.
The U.S. Dollar: Is the Correction Over?
Recently, one of the main influences on EUR/USD has been the currency that is the U.S. dollar. After weeks of a corrective decline, and after touching intraday lows at 102.30/40, the dollar is staging a comeback. Strong US data such as job growth and relatively stable consumer spending in the previous week have supported market scenario of longer duration higher interest rates by the Fed.
The emerging outlook portrays by the analysts at FXStreet would help curb further advances in EUR/USD in the event the dollar re-establishes itself. Also, the market participants await more information signals regarding the trend in the monetary policy from the latest US reports particularly, the ones related with labour and inflation rates.
Eurozone: Challenges Temper Optimism
As for the other side of the equation, euro fundamental picture combines optimism and risks. While the recent good performance in some core countries of the Eurozone is still evident, other related economic growth indicators have been revised downwards in some leading economies. Germany, a stalwart of manufacturing for the bloc, remains under pressure.
However, the latest communication of European Central Bank indicates that it shall not afford aggressive move towards its policies. Even as the inflation seems to be under control the ECB may not shock the Euro which has been quite volatile lately. Only a dovish ECB outlook for the Eurozone economic recovery despite the headwinds can provide modest support to the euro, IG noted.
Technical Outlook: EUR/USD Key Levels to Watch
From the technical aspect, the EUR/USD is currently trading between the major support and resistance levels. Authors of Action Forex found 1.0600 as significant support level and state that if it will be broken from the underside, it will initiate bearish pressure. On the other hand, any bounce back for the euro, may be halted by a resistance level of 1.0780.
Other indicators like the Relative Strength Index (RSI) point to a neutral territory as waiting for a breakout to occur by both traders. The 50-day moving average has also come into focus as a trend confirmation signal for December.
What’s Next for EUR/USD?
In December, it is the relation of economic figures and statement of central banks that should be presumed to determine the movement of EUR/USD pair. Here are three key factors to watch:
U.S. Economic Releases: A new escalation of dollar strength is always round the corner if labour market data release or inflation data release are anything out of expectations and this could put downward pressure on EUR/USD.
Eurozone Sentiment: Focus on German manufacturing new release and overall Eurozone consumer sentiment for the euro currency strength.
Central Bank Actions: Comments of the Federal Reserve and ECB will continue to be crucial since traders will weigh their policy direction towards 2024.
Conclusion: An Opportunity and Risk Calendar for the Month
I am therefore able to have an outlook on both the opportunity and the risks that EUR/USD has to offer as we approach the month of December. Although the US money can draw near-term support from cautious optimism in ECB, it stands poised to assert the strategists’ underlying dollar dominance if US data keeps outpacing the global economy.
A trader should balance on charts and level indicators without extending them to fundamental shifts. As markets head into the year-end, the moves of EUR/USD are expected to be some of the most volatile and followed in the market.