The trading during the shortened American holiday week was generally supportive of the upward rebound path for the Euro against the US Dollar (EUR/USD), gaining up to the resistance level of 1.0965, close to the psychological resistance level of 1.1000, which supports more bullish control over the trend. The currency pair ended the week stable around the level of 1.0936. The bulls are waiting for more stimuli so that the current upward attempts don’t evaporate.
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This new week is expected to show inflation metrics in the United States and the Eurozone with the smallest annual increases since early or mid-2021, reinforcing the sentiment that interest rates will not be raised again. The Federal Reserve’s preferred measures will be published on Thursday, with the US personal consumption expenditures price index rising by 3.1% in October compared to last year. The core measure, which excludes food and fuel and is considered a better gauge of core inflation, is expected to rise by 3.5%.
In contrast, Eurozone data for November, also due on Thursday, is likely to show inflation at 2.7%, the lowest level since July 2021. The core measure is expected to slow down to 3.9%. Despite progress in reducing inflation, officials on both sides of the Atlantic insist they want to see more evidence to be sure that consumer prices are permanently under control. Last Friday, European Central Bank President Christine Lagarde said, “We certainly do not declare victory.”
Overall, Federal Reserve officials in the US are united around a strategy based on delving into determining the policy path. The minutes of their last meeting showed that they noticed how the high-interest rates began to pressure households and businesses. The Federal Reserve will release its Beige Book of economic conditions and stories from across the country next Wednesday. The US personal income and expenditure report is also expected to show only slight progress in inflation-adjusted consumer spending. The downward shift in demand in October helps explain expectations of a slowdown in the economy after the growth spurt in the third quarter. The US government will issue its first revision of the third quarter GDP on Wednesday, and the Bloomberg survey’s average forecast calls for a 5% growth. The initial estimate of corporate profits is also expected.
Other US data this week includes new home sales for October, consumer confidence for November, weekly unemployment claims, and the main manufacturing survey.
When to buy the Euro against the Dollar, as per one of the traders at Citi Trader.
A trader at one of the world’s largest Forex dealers refuses to buy the Euro against the US Dollar EUR/USD exchange rate, saying that he is waiting for a better entry level. In this regard, Angus Yard from Citi says that the easy part of trading in the upward trend for the Euro against the Dollar EUR/USD has been completed, with the market moving from 1.0575 to above 1.0850. Citi’s market position gauge shows a drop in the “long” dollar position from +4 to 0.5 (on a positioning scale from -5 to +5). The Forex trader added, “The difficult part of the movement now starts with major resistance between 1.0970 and 1.1020, where I think it makes sense to add basic buy trades towards 1.0850 (and this was said at the beginning of the week before we recently retreated to 1.08525)”.
Overall, there has been some speculation about what the victory of Geert Wilders in the Netherlands vote means for the Euro, but the Citi trader says that this does not affect the performance of the Euro price much, just as his loss in March 2017 did not have much impact.
Looking ahead, the right time to enter into new purchases of the Euro against the Dollar EUR/USD will come when the European data comes from a very low base while the American data comes from a very high level. The trader added, “It won’t take much for this market, at this time of the year, to turn to sell the US Dollar directly, as voices calling for a rate cut from the Federal Reserve increase. I don’t see this yet, but the clients are very close to pulling the Federal Reserve. And if you stimulate and cause US Dollar selling volatility, it will only take a slight win in European data or a loss in US data to stimulate a US Dollar selling wave.”
He adds that he still sees the US Dollar trading weak until the end of the year but has reduced Euro against Dollar buy positions, looking for more price movement in both directions and better levels to increase exposure. He added, “If we break the 1.1020 level, I will sell the US Dollar quickly, as little resistance stands here on the way to 1.11 and 1.1150, which is my updated target for the end of the year.”
According to the performance on the daily chart below, the Euro against the Dollar EUR/USD price is still in an upward rebound range and requires stronger control by the bulls to break the psychological resistance of 1.1000. Conversely, over the same time period, the prospects for an upward move will be affected if the currency pair returns towards the support level of 1.0820. This week there will be activity of important economic data and statements by many officials of both the Federal Reserve and the European Central Bank, which will have a strong and direct reaction to the performance of the Euro/Dollar currency pair.
