The euro (EUR) remained steady against the US dollar (USD) on Tuesday, largely due to the dollar’s stability in a calm market environment. As of the latest update, the EUR/USD pair is trading near 1.1607, marking the end of a six-day rally that had seen it briefly hit a two-week high on Monday.
With no significant US economic data released on Tuesday, trading activity was relatively quiet. Traders seemed to react mildly to initial euro zone inflation figures. Recent data shows that the Harmonized Consumer Price Index (HICP) increased by 2.2% year-on-year in November, which is an uptick from October’s 2.1%. The core HICP also held steady at 2.4% year-on-year, unchanged from the previous month.
Monetary policy differences are continuing to shape the overall economic outlook. It seems the upward trend has the stronger pull, with many expecting the European Central Bank (ECB) to maintain interest rates during its meeting on December 18. On the other hand, US market confidence leans toward an anticipated interest rate cut by the Federal Reserve at its upcoming monetary policy meeting.
From a technical viewpoint, EUR/USD shows promising signs after breaking out of a falling wedge pattern, with prices consolidating as they prepare for a potential upward move. However, the 100-day simple moving average (SMA) is limiting any upside for now, while the 21-day SMA is providing necessary support. To confirm a bullish continuation, a clear break above the 100-day SMA is necessary, with the next resistance point around 1.1700.
If the price falls below the 21-day SMA, well, that could keep the outlook slightly bearish in the near term. While momentum indicators hint at a possible ongoing correction, they also suggest that bullish control is gradually increasing.
The Relative Strength Index (RSI) has risen above 50, and the Moving Average Convergence Divergence (MACD) has turned positive close to the zero line. A green histogram bar indicates a temporary recovery in momentum is underway.
Looking ahead, key economic announcements from both sides of the Atlantic later this week could stir up the EUR/USD pair. In the eurozone, traders will be paying attention to Wednesday’s Producer Price Index (PPI) and the HCOB Composite Purchasing Managers’ Index (PMI), which will be followed by retail sales on Thursday, and employment change along with final third-quarter gross domestic product (GDP) on Friday.
Meanwhile, in the US, everyone’s eyes will be on Wednesday’s ADP employment changes and ISM services PMI. Personal consumption expenditure (PCE) data on Friday will also be closely monitored for more insights into the Fed’s future monetary policy direction.
