EUR/USD drops amid long US weekend, German HICP in focus – FXStreet

• EUR/USD fell as the US dollar stabilized after a thin trading weekend due to the US Thanksgiving holiday.
• ECB President Schnabel ruled out the risk that inflation would fall below the central bank's target.
• Investors are awaiting German HICP data for new interest rate guidance from the ECB.

EUR/USD fell on Thursday as the US dollar (USD) recovered from Wednesday's decline. However, the short-term outlook for the euro (EUR) improved slightly after European Central Bank (ECB) board member Isabel Schnabel made less dovish comments in an interview with Bloomberg on Wednesday.

Schnabel said there was no risk that inflation would fall below the central bank's target and dialed back hopes for an aggressive policy easing cycle. He argued that the central bank's stimulus package did not address the structural problems currently facing the euro area.

On the other hand, the faster-than-expected growth in the preliminary Harmonized Index of Consumer Prices (HICP) in Spain and six major German states in November is expected to put pressure on the ECB's prospects for a major interest rate cut in December. There is. Spain's HICP accelerated to 2.4% as expected, faster than October's 1.8%. All six German states showed price pressures rising faster than the October readings.

Investors will now be paying attention to Germany's preliminary HICP data for November, which will be released at 1:00 p.m. Japan time. Economists expect inflation to accelerate to 2.6% year-on-year from 2.4% in October. On a month-over-month basis, HICP is expected to decline by 0.5%.

Meanwhile, concerns that U.S. President-elect Donald Trump's imposition of high tariffs could reduce eurozone exports have receded somewhat, potentially providing further support for the euro. According to MACE News, ECB President Christine Lagarde said in an interview with the Financial Times (FT) early in European trading on Thursday that “Mr. “That lack may indicate a willingness to negotiate.” “It's hard to make America great again when global demand is depressed because of trade tariffs,” Lagarde added.

Daily Digest Market Trends: EUR/USD falls as USD rebounds

• EUR/USD fell to around 1.0550 in European trading on Thursday after hitting a weekly high around 1.0590 on Wednesday. Major currency pairs are under pressure as the US dollar (USD) temporarily strengthens on a low-volume trading day following a long Thanksgiving weekend in the US.
• The US Dollar Index (DXY), which measures the value of the US dollar against six major currencies, found a temporary cushion around 106.00 on Thursday, rebounding to around 106.40 after a sharp decline the previous day. With no indications on the US economic calendar, the dollar will be influenced by market expectations of the Federal Reserve's expected interest rate policy at its December meeting.
• Traders believe there is a 66% chance the Fed will cut interest rates next month by 25 basis points (bps) to a range of 4.25% to 4.50%, according to the CME FedWatch tool. Despite the expected rise in the US Personal Consumption Expenditure Price Index (PCE) data for October, the outlook for Fed interest rate cuts remains strong. The annual Core PCE Price Index, the Fed's recommended measure of inflation (excluding volatile food and energy prices), rose 2.8%, a faster pace than September's 2.7%.

Technical analysis: EUR/USD aims to recover the 20-day EMA

EUR/USD fell after failing to extend Wednesday's gains above round-level resistance at 1.0600. The recovery in major currency pairs is seen as a mean-reverting movement and could expand to near the 20-day exponential moving average (EMA) around 1.0600. Still, the broader outlook remains bearish as short- to long-term intraday EMAs are all lower, indicating a downtrend.

The 14-day Relative Strength Index (RSI) turned oversold and then rebounded to above 40.00, suggesting bearish momentum has faded. However, the bearish trend has not disappeared.

On the downside, the November 22 low of 1.0330 will provide important support for euro bulls. On the contrary, the 50-day EMA near 1.0750 will be a key barrier.

(This article was corrected on 28 November at 08:01 GMT to state that EUR/USD hit a new weekly high near 1.0590 on Wednesday, rather than a new weekly low.)