Category: Currency Pairs

EUR/USD consolidates in a tight range near 1.0500, with investors focusing on the Fed’s policy meeting.
The Fed is widely expected to cut interest rates by 25 bps but to deliver slightly hawkish remarks on policy guidance.
ECB’s Rehn said that inflation stabilizing near the central bank’s target of 2% paves the way for more interest rate cuts.
EUR/USD trades in a tight range near the psychological figure of 1.0500 in Wednesday’s European session. The major currency pair consolidates as investors await the outcome of the last Federal Reserve’s (Fed) policy meeting of the year, which will conclude at 19:00 GMT. The Fed will also release the revision of the Summary of Economic Projections (SEP), also known as the dot plot, which shows fresh economic projections and where policymakers see Federal Fund Rates heading in the medium and long term.

Analysts at Bank of America (BofA) expect the Fed to reduce interest rates by 25 basis points (bps) to the 4.25%-4.5% range. The CME FedWatch tool also shows that market participants have fully priced in a 25 bps interest rate reduction.

With traders fully pricing in a standard rate cut announcement, investors will focus primarily on Fed Chair Jerome Powell’s press conference on interest rate guidance. BofA analysts expect Powell to signal a gradual rate-cut approach ahead, potentially indicating a pause in January if economic data meets expectations.

Meanwhile, traders are also confident that the Fed will leave interest rates unchanged at 4.25%-4.50% in January, according to the CME FedWatch tool.

Ahead of the Fed policy decision, the US Dollar (USD) shows a muted price action, with the US Dollar Index (DXY) wobbling near 107.00.

Daily digest market movers: EUR/USD trades quietly with Fed policy in focus
EUR/USD trades on the sidelines due to consolidation in the US Dollar ahead of the Fed’s policy decision. The Euro (EUR) is higher across the board on Wednesday but its outlook remains bearish as investors expect the European Central Bank (ECB) to head to the neutral rate, which officials have forecasted around 2%, by the first half of 2025.
Traders expect the ECB to reduce interest rates at every meeting till June 2025. Officials are highly concerned about growing economic risks in the Eurozone and are confident that price pressures will sustainably return to the central bank’s target next year.
On Tuesday, ECB policymaker and Finnish central bank Governor Olli Rehn said that inflationary pressures stabilizing near the bank’s target of 2% set the stage for further interest rate reduction. Rehn refrained from providing a specific rate cut path and said, “The speed and scale of the rate cuts will be determined in each meeting on the basis of incoming data and comprehensive analysis.”
When asked about how the continent will face incoming tariff hikes from the US President-elect Donald Trump administration, Rehn said, “Negotiation is preferable, and the European Union’s (EU) negotiating position can be strengthened by demonstrating in advance that it is ready to take countermeasures if the United States threatens Europe with higher tariffs.”

Euro PRICE Today

The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the New Zealand Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.09%	0.01%	0.05%	0.10%	0.35%	0.39%	0.08%
EUR	0.09%		0.11%	0.15%	0.19%	0.45%	0.49%	0.19%
GBP	-0.01%	-0.11%		0.04%	0.08%	0.34%	0.38%	0.07%
JPY	-0.05%	-0.15%	-0.04%		0.02%	0.28%	0.31%	0.00%
CAD	-0.10%	-0.19%	-0.08%	-0.02%		0.25%	0.30%	-0.01%
AUD	-0.35%	-0.45%	-0.34%	-0.28%	-0.25%		0.04%	-0.27%
NZD	-0.39%	-0.49%	-0.38%	-0.31%	-0.30%	-0.04%		-0.31%
CHF	-0.08%	-0.19%	-0.07%	-0.01%	0.01%	0.27%	0.31%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).

Technical Analysis: EUR/USD oscillates around 1.0500

EUR/USD has traded back and forth around the psychological figure of 1.0500 over the last five trading days. The major currency pair faces pressure near the 20-day Exponential Moving Average (EMA), which trades around 1.0535, suggesting that the near-term trend is bearish.

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

Looking down, the two-year low of 1.0330, reached on November 22, will provide key support. Conversely, the December 6 high of 1.0630 will be the key barrier for the Euro bulls.

• EUR/USD falls below 1.0500 as the US Dollar stays broadly firm on expectations that the Fed will cut interest rates but deliver hawkish guidance for 2025.
• ECB officials see the continuation of the gradual policy-easing cycle as appropriate.
• The collapse of German Scholz’s government has paved the way for general elections on February 23.

EUR/USD slides below the psychological resistance of 1.0500 on Tuesday. The major currency pair remains fragile as the US Dollar (USD) gains on expectations that the Federal Reserve (Fed) will adopt a slightly hawkish stance after reducing its key borrowing rates by 25 basis points (bps) to 4.25%-4.50% on Wednesday.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, ticks higher above 107.00.

According to the CME FedWatch tool, traders have priced in a 25 bps interest rate reduction for Wednesday’s policy meeting. The data also shows that the Fed is expected to leave interest rates unchanged in the January meeting.

Analysts at Macquarie said that the Fed’s stance could turn “slightly hawkish” from “dovish” on the assumption that 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.”

In Tuesday’s session, investors will focus on the United States (US) monthly Retail Sales data for November, which will be published at 13:30 GMT. Economists estimate that Retail Sales, a key measure of consumer spending, rose by 0.5%, faster than the 0.4% growth in October.

Daily digest market movers: EUR/USD drops as US Dollar moves higher

• EUR/USD drops after facing pressure near the key resistance of 1.0530 in Tuesday’s European session. The major currency pair struggles to break above the aforementioned hurdle as its broader outlook of the Euro (EUR) is bearish amid firm expectations that the European Central Bank (ECB) will reduce interest rates at every meeting until June 2025.
• The ECB has delivered a 100-bps interest rate reduction this year and is expected to loosen its monetary policy further by a similar margin next year, given that officials are confident about Eurozone inflation returning to the central bank’s target of 2%. Also, ECB policymakers have become worried about growing economic risks due to weak demand and potential tariffs from incoming US President-elect Donald Trump.
• After the decision to cut rates on Thursday, a number of ECB officials, including President Christine Lagarde, have agreed to the need for more interest rate cuts. On Monday, Lagarde said that the ECB “will cut rates further if incoming data confirm that disinflation is on track”. Lagarde’s dovish remarks on the policy outlook were backed by the assumption that “inflation momentum for services has dropped steeply recently.”
• ECB executive board member Isabel Schnabel, who remains an outspoken hawk, also agreed to a gradual removal of policy restrictions. “Lowering policy rates gradually towards a neutral level is the most appropriate course of action,” Schnabel said at an event in Paris on Monday. However, she warned that the ECB should remain vigilant to any “shocks that have the capacity to destabilize inflation expectations.”
• In the European session on Tuesday, ECB policymaker and Governor of the Bank of Finland also delivered dovish remarks on interest rates. Rehn said, “The direction of our monetary policy is clear” as “inflation is more clearly starting to stabilize at the 2% target”. Rehn refrained from guiding a specific interest rate path saying that “the speed and scale of rate cuts will be determined in each meeting”.
• On the political front, the German parliament has passed the no-confidence motion against Chancellor Olaf Scholz’s government, which paved the way for general elections on February 23. According to market expectations, conservative challenger Friedrich Merz would defeat Scholz.
• On the economic data front, the German IFO sentiment surveys for December have shown that Business Climate and Expectations at 84.7 and 84.4, respectively, have come in weaker than expected. IFO Current Assessment, an indicator of current conditions and business expectations, surprisingly rose to 85.1 from 84.3 in November.

Euro PRICE Today

The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Australian Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.20%	-0.08%	-0.18%	0.22%	0.44%	0.34%	0.27%
EUR	-0.20%		-0.29%	-0.42%	0.02%	0.24%	0.14%	0.06%
GBP	0.08%	0.29%		-0.10%	0.31%	0.52%	0.42%	0.36%
JPY	0.18%	0.42%	0.10%		0.41%	0.63%	0.52%	0.47%
CAD	-0.22%	-0.02%	-0.31%	-0.41%		0.21%	0.12%	0.05%
AUD	-0.44%	-0.24%	-0.52%	-0.63%	-0.21%		-0.10%	-0.18%
NZD	-0.34%	-0.14%	-0.42%	-0.52%	-0.12%	0.10%		-0.07%
CHF	-0.27%	-0.06%	-0.36%	-0.47%	-0.05%	0.18%	0.07%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).

Technical Analysis: EUR/USD wobbles around 1.0500

EUR/USD trades around the psychological figure of 1.0500, where the pair has been hovering for the last four trading days. The major currency pair faces pressure near the 20-day Exponential Moving Average (EMA), which trades around 1.0540, suggesting that the near-term trend is bearish.

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.

The Euro (EUR) briefly gained momentum earlier on Monday, supported by better-than-expected preliminary December PMI data from the Eurozone. However, Scotiabank’s Chief FX Strategist, Shaun Osborne, highlights the challenges in maintaining upward momentum amid persistent market concerns.

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Key Highlights

1. Eurozone PMI Data Provides a Boost
   • French and German Services PMIs came in stronger than expected, pushing the Eurozone Services PMI to 51.4, a notable improvement of over two points from November.
   • Despite this positive data, the Euro has struggled to hold onto gains, weighed down by lingering trade concerns.
2. Moody’s Downgrades France
   • Late Friday, Moody’s unexpectedly downgraded France’s sovereign credit rating from Aa3 to Aa2, adding to market jitters.
   • This caused a slight widening of the Bund/OAT spread (the difference between German and French bond yields), which later narrowed back to Friday’s closing levels.
3. EUR/USD Fails to Break Above 1.05
   • The Euro remains stuck within its December trading range.
   • Intraday price action suggests a bearish bias, with another rejection at levels above 1.05.

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Technical Outlook

• Support: 1.0450–1.0460 remains a critical zone.
• Resistance: Immediate resistance is seen at 1.0535–1.0540.
• Bias: Intraday momentum indicates downside pressure, keeping the Euro vulnerable unless it can break decisively above 1.05.

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Conclusion

While the Euro received a lift from stronger PMI data, the lingering effects of Moody’s credit downgrade for France and trade-related concerns have dampened enthusiasm. For now, EUR/USD appears trapped in its range, with bearish sentiment capping gains above 1.05.

GBP/USD trades near 1.2640 during early European hours on Monday, breaking a three-day losing streak but remaining under pressure within a descending channel. The pair hovers below the channel’s upper boundary and the nine-day Exponential Moving Average (EMA) at 1.2684, reinforcing a bearish outlook.

On the daily chart, the bearish sentiment is underlined by the 14-day Relative Strength Index (RSI), which stays below the neutral 50 mark, signaling weak momentum. Additionally, the pair trades below both the nine-day and 14-day EMAs, further suggesting limited upside potential in the short term.

Key Support Levels
The immediate downside target for GBP/USD lies near its four-week low of 1.2487, recorded on November 22. A decisive break below this level could intensify the bearish momentum, potentially pushing the pair toward the descending channel’s lower boundary near its yearly low of 1.2299, last seen on April 22.

Resistance Levels
On the upside, the initial resistance is pegged at the descending channel’s upper boundary, aligned with the nine-day EMA at 1.2684. A breakout above this level could ease the bearish pressure and pave the way for a recovery toward the recent five-week high of 1.2811, marked on December 6.

Until GBP/USD breaks out of its descending channel, the broader bias remains tilted toward further downside risks.

GBP/USD: Daily Chart

British Pound PRICE Today

The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the US Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.12%	-0.14%	-0.09%	-0.06%	-0.18%	-0.26%	-0.28%
EUR	0.12%		0.04%	0.13%	0.13%	0.12%	-0.05%	-0.10%
GBP	0.14%	-0.04%		-0.04%	0.09%	0.08%	-0.12%	-0.14%
JPY	0.09%	-0.13%	0.04%		0.02%	-0.07%	-0.14%	-0.10%
CAD	0.06%	-0.13%	-0.09%	-0.02%		-0.07%	-0.21%	-0.23%
AUD	0.18%	-0.12%	-0.08%	0.07%	0.07%		-0.17%	-0.22%
NZD	0.26%	0.05%	0.12%	0.14%	0.21%	0.17%		-0.04%
CHF	0.28%	0.10%	0.14%	0.10%	0.23%	0.22%	0.04%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).

• EUR/USD maintains strength, trading around 1.0520 during Monday’s Asian session.
• The US Federal Reserve is expected to announce a 25 basis point rate cut at its final monetary policy meeting of 2024.
• The CME FedWatch tool indicates near-full market pricing of a quarter-point cut.
• The Euro finds support following François Bayrou’s appointment as French Prime Minister by President Emmanuel Macron, boosting political stability prospects.

Market Drivers

1. Federal Reserve Expectations
The US Dollar remains under pressure as markets anticipate a dovish stance from the Federal Reserve this week. Analysts widely expect a 25 basis point rate cut, reflecting the Fed’s efforts to align policy with inflation that remains above 2%.

Fed Chair Jerome Powell has signaled a cautious approach to further easing, recently stating, “We can afford to be a little more cautious as we try to find neutral.” Powell emphasized the need for patience, indicating that the Fed is unlikely to rush into additional cuts.

Markets will scrutinize Powell’s post-meeting press conference and the updated Dot Plot projections, which may provide further insights into the central bank’s 2025 policy trajectory.

2. Political Stability in France
The Euro received a boost after President Emmanuel Macron appointed centrist ally François Bayrou as Prime Minister. The move comes after the resignation of Michel Barnier, whose government collapsed due to dissatisfaction from both far-right and left-wing factions over fiscal policies. Bayrou’s appointment signals potential political stability in France, an outcome that supports the Euro.

3. European Central Bank (ECB) Stance
While the Euro gained traction, ECB officials have recently maintained a cautious tone. Governing Council member Robert Holzmann warned against cutting interest rates solely to stimulate growth, stating that the ECB’s mandate is to ensure price stability. Holzmann added, “Lowering rates now to boost the economy would contradict our current stance,” reflecting a commitment to a balanced approach.

Outlook

The EUR/USD pair remains well-supported ahead of Wednesday’s Fed meeting, as the US Dollar faces downward pressure from falling Treasury yields and dovish Fed expectations. However, potential upside in the Euro may be capped by the ECB’s cautious outlook.

Traders will focus on Powell’s remarks and the Fed’s Dot Plot updates, as well as ongoing developments in European political and economic landscapes, to guide the next moves for EUR/USD.

The EUR/USD pair advanced toward the 1.0500 mark on Friday as the US Dollar surrendered its intraday gains. The Euro found support after French President Emmanuel Macron appointed centrist ally Francois Bayrou as Prime Minister, signaling the potential for greater political stability in France.

French Political Developments

Macron’s appointment of Bayrou follows the resignation of Michel Barnier, whose government collapsed after losing a confidence vote in Parliament. Barnier faced backlash from both far-right and left-wing factions over a controversial fiscal budget proposal, which included €60 billion ($62.9 billion) in tax hikes. Bayrou’s immediate priority will be securing the passage of a special law to roll over the 2024 budget, with a tougher legislative battle anticipated over the 2025 budget early next year.

The resolution of political instability in France has bolstered the Euro (EUR) in the short term, though its broader outlook remains subdued due to expectations of further European Central Bank (ECB) rate cuts.

ECB Policy Outlook

The ECB reduced its Deposit Facility Rate by 25 basis points (bps) to 3% on Thursday, with ECB President Christine Lagarde hinting at more rate cuts ahead. Lagarde expressed concerns about slowing Eurozone growth, citing weak exports, declining business investment, and contracting manufacturing. She emphasized that the ECB remains committed to returning inflation to its 2% target by 2025.

Lagarde also revealed that some ECB officials had supported a larger 50-bps rate cut, highlighting concerns about faltering economic growth. The latest ECB staff projections indicate lower-than-expected Eurozone growth of 0.7% in 2024 and 1.1% in 2025.

Eurozone economic data released Friday showed mixed results. Industrial Production was flat in October after a sharp contraction in September, outperforming expectations of a 0.1% decline. Year-over-year, Industrial Production fell by 1.2%, better than the anticipated 1.9% drop.

US Dollar Dynamics

The US Dollar Index (DXY) dipped below 107.00 despite firm expectations of a hawkish Federal Reserve stance. The Fed cut its key borrowing rate by 25 bps to a range of 4.25%-4.50% on Wednesday. While markets expect rates to remain unchanged in January, the Fed’s hawkish tone reflects persistent inflation pressures and stronger-than-expected economic data.

The US Producer Price Index (PPI) for November accelerated faster than expected, with headline PPI and Core PPI rising 3% and 3.4% year-over-year, respectively. Analysts at Macquarie noted that slowing disinflation, a lower-than-forecast unemployment rate, and buoyant financial markets are contributing to the Fed’s more cautious stance on policy easing.

Market Outlook

EUR/USD remains supported near 1.0500 amid optimism surrounding French political developments and a weaker US Dollar. However, continued ECB dovishness and slowing Eurozone growth could limit the pair’s upside in the medium term. Traders will closely monitor upcoming US and Eurozone economic data and central bank policy updates for further direction.

Technical Analysis: EUR/USD rebounds but stays below 20-day EMA

EUR/USD rebounds to near the psychological figure of 1.0500. However, the outlook of the major currency pair remains bearish as it retreated 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 provide key support. Conversely, the 20-day EMA will be the key barrier for the Euro bulls.

FAQs for ECBs

How does the European Central Bank affect the Euro?

The Eurozone’s reserve bank is the European Central Bank (ECB), located in Frankfurt, Germany. The ECB oversees the region’s monetary policy and sets interest rates. Maintaining price stability, or limiting inflation at about 2%, is the major responsibility of the ECB. Interest rate changes are its main means of accomplishing this. A stronger Euro is typically the outcome of relatively high interest rates, and vice versa. Eight times a year, the ECB Governing Council meets to decide on monetary policy. Six permanent members, including Christine Lagarde, the president of the European Central Bank, and the presidents of the Eurozone’s national banks make decisions.

How does Quantitative Easing (QE) impact the Euro and what is it?

The European Central Bank has the authority to implement quantitative easing as a policy tool in dire circumstances. The ECB creates euros and uses them to purchase assets from banks and other financial institutions, typically corporate or government bonds. This procedure is known as quantitative easing. A weaker Euro is typically the outcome of QE. When merely cutting interest rates is unlikely to accomplish the goal of price stability, quantitative easing (QE) is the last option. The ECB employed it throughout the COVID pandemic, the Great Financial Crisis of 2009–2011, and 2015, when inflation remained stubbornly low.

How does the Euro get affected by quantitative tightening (QT)?

The opposite of QE is quantitative tightening (QT). It is carried out when inflation begins to rise and an economic recovery is under way, following quantitative easing. In QT, the European Central Bank (ECB) stops purchasing new bonds and reinvesting the principal on the assets it already owns, whereas in QE, the ECB buys government and corporate bonds from financial institutions to give them liquidity. For the Euro, it is often bullish or favorable.

The EUR/USD exchange rate continues to hover around the 1.0500 level, rebounding modestly to 1.0498 after touching a weekly low of 1.0452. Technical indicators suggest a precarious balance, with potential upside momentum if the pair sustains a position above the 1.0500 threshold.

Key resistance levels are noted at 1.0530 and 1.0600, while support levels are marked at 1.0452 and the year-to-date (YTD) low of 1.0331. For the fifth consecutive day, EUR/USD shows reluctance to stray significantly from the 1.0500 mark, despite the European Central Bank’s rate cut on Thursday, which briefly pushed the pair to 1.0452. Buyers have since stepped in, lifting the exchange rate closer to its current level of 1.0498.

EUR/USD Price Forecast: Technical Outlook

On the daily chart, EUR/USD remains anchored near 1.0500, unable to decisively break lower and challenge the YTD low of 1.0331. While the pair continues to form a series of lower highs, further downward movement may face resistance due to increasing buying momentum.

The Relative Strength Index (RSI) hints at strengthening buyer activity. A daily close above 1.0500 could provide the impetus for a move higher. In this scenario, the key resistance levels are:

• December 12 high at 1.0530
• Psychological barrier at 1.0600
• Last week’s peak at 1.0629

Conversely, if EUR/USD remains below 1.0500, further losses could follow. A break below 1.0452 would expose additional downside targets, including:

• November 26 low at 1.0424
• November 22 swing low at 1.0331

Traders should monitor the pair’s ability to sustain momentum near critical levels as the market reacts to the ECB’s policy decisions and broader economic factors.