EUR/USD Struggles to Break Resistance Amid Weaker USD

EUR/USD

Prediction: decrease

The EUR/USD pair is trading in a mild downtrend after failing to sustain its recent upward movement. The chart shows technical indicators pointing to a correction from a strong resistance zone. The USD weakened slightly after U.S. CPI data showed a mild drop in inflation, giving an opportunity for other currencies, such as JPY, to rise.

FUNDAMENTAL ANALYSIS

U.S. CPI data: U.S. inflation in December showed a slight decrease, with core inflation rising only 0.2% compared to the 0.3% forecast, creating expectations that the Fed might reduce interest rates in the future, which affects the USD's strength.

Fed rate cut expectations: Growing expectations of a Fed rate cut in 2025 following weaker CPI data. The market is preparing for the Fed’s next moves and President Donald Trump’s policies. Weakened USD: After the U.S. CPI data showed core inflation rising less than expected, market expectations for the Fed’s rate cut adjusted, leading to a weakening of the USD.

Safe-haven demand: While there hasn’t been much market response to geopolitical news, expectations of political actions next week, including tax measures from the Trump administration, are causing investor caution.

TECHNICAL ANALYSIS

Key Resistance:

● A strong resistance level is at $1.03749, which price failed to break in previous attempts, potentially continuing to block EUR/USD’s recovery.

● If the price fails to break this level, a further downward adjustment could occur, possibly testing lower support levels.

Key Support:

● The nearest support level is $1.02896, followed by $1.02221. If this support is broken, EUR/USD could test a lower level at $1.01766, confirming a longer-term bearish trend.

RSI Indicator: The RSI is around 50, indicating weakening upward momentum and possibly signaling a stronger bearish trend.

EMA: Price is currently trading below the 34 EMA, 89 EMA, and 200 EMA, indicating a continued bearish trend in the short term. The 200 EMA at 1.04198 is acting as a strong resistance. If EUR/USD cannot break this level, it may continue to decline towards lower support levels.

EUR/USD is expected to continue its downward trend due to corrective signals from the strong resistance zone and the weakened USD following lower-than-expected inflation data. If the price cannot break key resistance levels, the pair is likely to fall further toward deeper support levels. Investors need to monitor Fed developments and significant economic information to confirm the longer-term bearish trend.

 

 

 

 

 

 

 

 

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