EUR Base Rate Dynamics: Key Resistance & Inflation Data

High-Impact EU and US Inflation Figures to Steer Short-Term EUR Base Rate Movement

Currently, the EUR/USD pair is grappling with key resistance levels. Therefore, market participants closely monitor upcoming high-impact inflation data from the European Union (EU) and the United States. This intersection is going to play a pivotal role in shaping the near-term trajectory of the EUR/USD exchange rate.

EUR/USD Facing Crucial Resistance

The EUR into USD pair has exhibited a bullish run, trading above the 200-day simple moving average (SMA). However, the journey may face another litmus test in the form of US Gross Domestic Product (GDP) data later this week. Forecasts hint at a potentially robust Q3 performance from the US economy, which could exert downward pressure on the recent bullish momentum witnessed in 100 EUR to USD.

Potential Pullback Scenarios

Analysts point to signs of slowing momentum, citing the Relative Strength Index (RSI) nearing overbought territory and the Moving Average Convergence Divergence (MACD) approaching a bearish crossover. While these conditions have yet to materialize fully, it might not be the best time to trade EUR/USD yet. Key resistance levels remain in play, with notable hurdles at 1.0960 and a substantial one at 1.1100.

Event Risk for the Remainder of the Week

A critical juncture awaits as the market awaits the second estimate of US GDP for Q3. Despite expectations of a slight upward revision, the gains made in Q3 could face scrutiny as more current (weaker) economic data takes precedence. The potential upward revision could lead to temporary resistance. However, a subsequent consolidation might appear as more recent data provides a more accurate reflection of the economy.

EU Inflation Data: A Pivotal Catalyst

Simultaneously, EU inflation data for November is anticipated to reveal a decline, deviating from previous forecasts. The data, including both headline and core readings, holds significance as it could signal a faster decline in inflation compared to other developed nations. This may prompt the European Central Bank (ECB) to consider interest rate cuts to stimulate economic activity, potentially resulting in a weaker euro in the longer term.

EUR/USD Forum Action Post 15-Week High

Having recently touched a 15-week high just above 1.1000, the EUR/USD pair is experiencing a pullback, influenced by a broader market shift towards risk appetite. The remarks of Federal Reserve Governor Christopher Waller on monetary policy contributed to a risk rally, causing a decline in the US Dollar against major currencies.

Eyes on Upcoming Economic Indicators

Wednesday brings a fresh set of economic indicators, including Eurozone Consumer Confidence and US GDP growth. The Economic Sentiment Indicator, coupled with quarterly US GDP figures, is anticipated to offer insights into potential market shifts and their impact on EUR/USD dynamics.

EUR/USD: Technical Outlook and Caution

While the Euro’s rally has been robust, technical indicators suggest a note of caution. The 50-day SMA remains in bearish territory, and the RSI nearing overbought levels signals a potential for profit-taking. Traders are vigilant for signs of a pullback opportunity in the EUR base rate.