The euro dipped slightly on Thursday as traders braced for the upcoming release of the Core Personal Consumption Expenditures (PCE) price index, which is the US Federal Reserve’s preferred inflation indicator, while absorbing the latest US job data. As it stands, EUR/USD is down 0.19% at 1.1649.
EUR/USD may increase further amid potential Fed rate cut
The overall sentiment in financial markets remains steady as investors await the Fed’s significant decisions on December 10th. The dollar got a lift from favorable US economic data, indicating a robust labor market, highlighted by a notable drop in new jobless claims for the week ending November 29.
On the other hand, Challenger job cuts data revealed that over 70,000 jobs were eliminated in November, marking the highest cuts for that month since 2022.
In light of this economic backdrop, traders are estimating an 85% likelihood that the Fed will lower rates next week. However, this could shift dramatically if the core PCE index for September, set to be released on Friday, surpasses the 3% mark.
The European Central Bank (ECB) is a primary support for the euro, as interest rates are held near 2%, hinting that the easing cycle has concluded. Lagarde noted on Wednesday that “inflation will hover around 2% for a few months.”
Recent data from the Eurozone showed that retail sales for October beat expectations and construction PMI readings improved across the Eurozone, Germany, France, and Italy, even though they still reflect contraction.
Market trends: Euro rises while dollar softens due to remarks from Lagarde
- The dollar is expected to continue its decline, yet the US dollar index (DXY), which measures the dollar’s strength against six major currencies, rose 0.19% to 99.05 at the time.
- The new jobless claims for the week ending Nov. 29 totaled 191,000, which was lower than the anticipated 220,000 and also down from last week’s revised figure of 218,000. Continuing claims decreased from 1,943,000 to 1,939,000 as of November 22.
- Employers reported 71,321 job layoffs in November, according to Challenger Gray & Christmas, indicating a 24% increase from last year, but a 53% drop compared to October of this year.
- ECB President Lagarde mentioned the Eurozone’s robust economy, citing steady household spending and a resilient job market. The central bank is anticipated to maintain current interest rates during its meeting on December 18.
Technical analysis: EUR/USD stabilizes in new range as momentum fades
Despite the recent dip, EUR/USD has remained around 1.1650 for four consecutive sessions, creating a new trading range between this mark and 1.1700. The buying momentum appears to be subsiding, as indicated by the Relative Strength Index (RSI), which raises concerns about the possibility of traders testing the 1.1800 point before attempting to reach the year-to-date high of 1.1918.
If EUR/USD drops below 1.1650, immediate support is found at the 50-day simple moving average (SMA) at 1.1610, followed by the 20-day SMA at 1.1589, then at 1.1500.
