EUR/USD Price Forecast: The Bullish Case Continues, But Be Wary of Potential Reversal
The Euro (EUR) and US Dollar (USD) are locked in a tense standoff, with the former attempting to break free from a prolonged consolidation phase. As of Tuesday, the EUR/USD pair is trading at 1.1607, having paused its six-day winning streak after briefly reaching two-week highs on Monday. This pause comes as no major US data was released, and traders showed a muted reaction to the preliminary Eurozone inflation numbers.
The Harmonized Index of Consumer Prices rose 2.2% year-over-year (YoY) in November, surpassing the 2.1% recorded in October, while the Core HICP increased 2.4% YoY, unchanged from the previous month. These figures highlight the ongoing inflationary pressures in the Eurozone, which could influence the European Central Bank's (ECB) monetary policy decisions.
The broader outlook is shaped by monetary policy divergence. The European Central Bank is widely expected to maintain its current interest rate stance at the December 18 meeting, while the US markets remain convinced that the Federal Reserve (Fed) will lower rates at next week's policy meeting. This divergence could have significant implications for the EUR/USD pair.
From a technical perspective, the EUR/USD remains in a constructive phase following its breakout and retest of the falling-wedge pattern. Prices are consolidating before a potential next leg higher, with the 100-day Simple Moving Average (SMA) acting as an immediate upside cap and the 21-day SMA providing dynamic support. A clear break above the 100-day SMA is needed to confirm bullish continuation, with the next resistance level near 1.1700.
However, traders should be cautious of a potential reversal. A drop below the 21-day SMA would indicate a shift in the near-term outlook, making it slightly bearish. Momentum indicators support the ongoing consolidation but suggest that bulls are gradually gaining control. The Relative Strength Index (RSI) has climbed back above 50, and the Moving Average Convergence Divergence (MACD) has turned positive near the zero line, hinting at a tentative momentum pickup.
Key economic releases later this week from both sides of the Atlantic could provide fresh impetus for the EUR/USD pair. In the Eurozone, traders will monitor Wednesday's Producer Price Index (PPI) and HCOB Composite Purchasing Managers Index (PMI), followed by Retail Sales on Thursday and Employment Change (QoQ) and final Q3 Gross Domestic Product (GDP) figures on Friday. In the United States, Wednesday's ADP Employment Change and ISM Services PMI will be in focus, while Friday's Personal Consumption Expenditures (PCE) data will be closely watched for further clues on the Fed's monetary policy outlook.
The US Dollar's performance against other major currencies today is also worth noting. The USD was the strongest against the Japanese Yen, with a 0.02% increase. The table provides a snapshot of the percentage change of the US Dollar against listed major currencies, offering insights into the currency's performance and potential impact on the EUR/USD pair.
