EUR/USD Pulls Back Ahead of December High

Euro Outlook: EUR/USD

EUR/USD starts to carve a series of lower highs and lows as it slips to a fresh weekly low (1.0360), and the exchange rate struggle to retain the rebound from the monthly low (1.0178) as it pulls back ahead of the December high (1.0630).

EUR/USD Pulls Back Ahead of December High

Looking ahead, the opening range for February is in focus for EUR/USD amid the kneejerk reaction to the European Central Bank (ECB) meeting, and it seems as though the Governing Council will retain the current course for monetary policy as ‘we expect inflation to fluctuate around its current level in the near term.’

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Euro-Area Economic Calendar

In turn, the update to the Euro Area Consumer Price Index (CPI) may encourage the ECB further unwind its restrictive policy as the core rate is expected to narrow to 2.6% in January from 2.7% per annum the month prior, and signs of slowing inflation may drag on the Euro as it fuels speculation for lower interest rates.

With that said, EUR/USD may continue to give back the rebound from the monthly low (1.0178) should the bearish price series persist, but the exchange rate may stage further attempts to test the December high (1.0630) as it no longer responds to the negative slope in the 50-Day SMA (1.0424).

EUR/USD Chart – Daily

Chart Prepared by David Song, Senior Strategist; EUR/USD on TradingView

• EUR/USD starts to carve a series of lower highs and lows as it extends the weakness from earlier this week, with a close below 1.0370 (38.2% Fibonacci extension) raising the scope for a move towards 1.0200 (23.6% Fibonacci retracement).
• A breach below parity opens up 0.9950 (50% Fibonacci extension), but lack of momentum to close below 1.0370 (38.2% Fibonacci extension) may curb the recent decline in EUR/USD.
• Need a move above the 1.0448 (2023 low) to 1.0480 (100% Fibonacci extension) zone for EUR/USD to snap the bearish price series, with a breach above the monthly high (1.0533) bringing the 1.0580 (78.6% Fibonacci extension) to 1.0610 (38.2% Fibonacci extension) region on the radar.

Additional Market Outlooks

GBP/USD Holds Below 50-Day SMA Ahead of BoE Rate Decision

Gold Price Rallies to Fresh Record High amid Limited Response to Fed

USD/CAD Unfazed by BoC Rate-Cut Ahead of Fed Decision

AUD/USD Susceptible to Negative Slope in 50-Day SMA

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong