Maintaining a Meeting-by-meeting Decision-making Approach Is a Prudent Strategy

Summary:

During the European session on Wednesday, the EURUSD is consolidating around the 1.0500 level. Given that traders are exercising caution and refraining from making new bets ahead of the Federal Reserve's policy announcement, the potential for further appreciation of the EURUSD remains constrained.

BUY EURUSD

Close Time

CLOSED

1.04345

Entry Price

1.07050

1.03300

1.15404 -0.00261 -0.23%

104.5

Pips

Loss

1.03300

1.03293

Exit Price

1.04345

Entry Price

1.07050

Fundamentals

The final determination of the Eurozone's overall inflation rate for November stands at a YoY increase of 2.2%, up from 2.0% in October. Concurrently, the core Consumer Price Index (CPI), which excludes food, alcohol, and tobacco, has decreased to 2.7%, down from 2.9% in October.

The services sector has made the most significant contribution to the eurozone's annual inflation rate, accounting for +1.74 percentage points, followed by food, alcohol, and tobacco (+0.53 percentage points) and non-energy industrial goods (+0.17 percentage points). On the other hand, the energy sector has detracted -0.19 percentage points, reflecting subdued demand and declining energy prices.

The overall inflation rate for the European Union has been finalized at a YoY rate of 2.5%. Among member states, Ireland recorded the lowest annual inflation rate at 0.5%, followed by Lithuania and Luxembourg, both at 1.1%. In contrast, Romania has the highest inflation rate at 5.4%, followed by Belgium (4.8%) and Croatia (4.0%). Compared to October, four EU member states experienced a decrease in inflation rates, three maintained their rates, while twenty member states saw an increase in inflation.

European Central Bank (ECB) Governing Council member Rehn stated on Tuesday that the inflation rate in the eurozone has stabilized significantly at the ECB's target of 2%, which lays the groundwork for further interest rate cuts. "The direction of our monetary policy is now clear, and the pace and magnitude of rate reductions will be determined at each meeting based on the data received and comprehensive analysis."

He added that uncertainties surrounding trade policy are exerting pressure on the near-term economic outlook, with risks skewed to the downside, but Europe must be prepared to confront trade conflicts with the U.S.

Rehn remarked, "Negotiation is preferable; if the U.S. threatens Europe with higher tariffs, the EU can proactively signal its readiness to implement countermeasures, thereby strengthening its negotiating position."

Traders anticipate that the ECB will lower interest rates at each meeting until June 2025. Officials are acutely aware of the increasing economic risks in the eurozone and believe that price pressures will persist in returning to the ECB's target level next year.

Maintaining a Meeting-by-meeting Decision-making Approach Is a Prudent Strategy_1

Technical Analysis

The EURUSD continued to consolidate within the trading range of 1.0450 to 1.0600 on Wednesday, with the 20-day SMA appearing to be a significant barrier to overcome.

Technically, the Relative Strength Index has turned upward below the neutral level of 50, while the MACD is moving sideways at the zero line, indicating a lack of direction. Both indicators confirm that the market is experiencing a correction to the uptrend. A break of the critical level at 1.0412 could lead to a retest of the two-year low at 1.0330, followed by the low of 1.0220 from November 2022.

On the other hand, for bulls to maintain upward momentum, a breakout above the 20-day SMA at 1.0520 is necessary. A decisive break and sustained hold above this level would pave the way for a retest of the significant 1.0600 threshold. A breakout from this range would facilitate further upward movement.

Overall, the EURUSD has been trading within a narrow range since mid-November, and the current risk outlook is negative, though not severe. Attention should be paid to the support strength at the 1.0421 level.

Trading Recommendations

Trading Direction: Buy

Entry Price: 1.0435

Target Price: 1.0705

Stop Loss: 1.0330

Valid until: January 2, 2025 23:55:00

Support: 1.0453, 1.0412, 1.0330

Resistance: 1.0520, 1.0538, 1.0610

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Risk Disclosure

The risk of loss in trading financial instruments such as stocks, FX, commodities, futures, bonds, ETFs and crypto can be substantial. You may sustain a total loss of the funds that you deposit with your broker. Therefore, you should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources.

No decision to invest should be made without thoroughly conducting due diligence by yourself or consulting with your financial advisors. Our web content might not suit you since we don't know your financial conditions and investment needs. Our financial information might have latency or contain inaccuracy, so you should be fully responsible for any of your trading and investment decisions. The company will not be responsible for your capital loss.

Without getting permission from the website, you are not allowed to copy the website's graphics, texts, or trademarks. Intellectual property rights in the content or data incorporated into this website belong to its providers and exchange merchants.

Recent Searches

Top Searches

Markets

Analysis

User

24/7

Economic Calendar

Education

Data