On Friday, EUR/USD held steady near 1.1650, positioning the pair to close the week with a 0.39% gain. Trading momentum softened as investors shifted focus to next week’s Federal Reserve decision.
Euro holds gains as US inflation and sentiment guide market tone
US data provided modest support for the Dollar, trimming earlier losses against the Euro. Inflation figures broadly matched expectations, while the University of Michigan’s Consumer Sentiment survey showed a clearer recovery in household confidence.
In the Eurozone, monthly growth data once again surprised to the upside, underscoring the bloc’s resilience. However, ECB Governing Council member Francois Villeroy cautioned that current policy settings are “not a comfortable position,” stressing that downside risks to inflation outweigh upside pressures.
At the geopolitical level, the unresolved Russia-Ukraine conflict continues to act as a structural headwind for the Euro, despite reports of incremental progress in discussions between the Kremlin and the White House, as well as ongoing diplomatic engagement between Kyiv and Washington.
Daily market movers: US Dollar pares losses but still weighs on EUR
The core PCE Price Index — the Fed’s preferred inflation gauge — rose 0.2% MoM in September, matching forecasts and the prior reading. On an annual basis, core PCE eased slightly from 2.9% to 2.8%, in line with expectations.
The University of Michigan’s December Consumer Sentiment index climbed to 53.3, beating the 52.0 forecast and improving from November’s 51.1. Inflation expectations moderated, with one-year projections falling to 4.1% from 4.5%, and five-year expectations easing to 3.2% from 3.4%.
Despite the mixed macro backdrop, money markets continue to price an 84% probability of a 25 bps Fed rate cut next week, according to Capital Edge.
The US Dollar Index (DXY) slipped 0.09% to 98.98, underscoring a muted performance heading into the weekend.
Technical analysis: EUR/USD struggles below 1.1650, with 1.1600 in focus
EUR/USD has traded tightly around 1.1650 for four consecutive sessions, consolidating between this level and 1.1700. Repeated failures to break above 1.1700 have opened the door to mild bearish pressure, reflected in a softening RSI.
This dynamic threatens to delay any renewed attempt toward 1.1800 and the year-to-date high at 1.1918.
A daily close below 1.1650 would expose the pair to the 50-day SMA near 1.1609. Below that, the 20-day SMA at 1.1589 comes into play, followed by the key psychological threshold at 1.1500.
