EUR/USD is under selling pressure around 1.0530 during early trading hours, driven by a strengthening U.S. dollar. Investors are keenly anticipating European Central Bank (ECB) President Christine Lagarde’s speech and the release of the U.S. ISM Manufacturing Purchasing Managers’ Index (PMI) later on Monday.
Eurozone Inflation Data
Eurozone inflation, measured by the Harmonized Index of Consumer Prices (HICP), increased to 2.3% year-on-year in November, up from 2.0% in October, aligning with market expectations and surpassing the ECB’s target of 2.0%. Meanwhile, core HICP, which excludes volatile items, rose to 2.8% year-on-year, up from 2.7% in the previous month, also meeting forecasts.
Despite these inflationary pressures, market participants have fully priced in a 25 basis point rate cut by the ECB this month, marking the bank’s fourth rate cut this year. However, expectations for a larger 50 basis point cut have declined amid slight improvements in Eurozone growth forecasts. The anticipation of a December rate cut has added selling pressure to the euro.
U.S. Federal Reserve Outlook
The U.S. Federal Reserve’s cautious stance continues to support the U.S. dollar. Fed Chairman Jerome Powell reiterated that “the economy is not sending any signal that we need to rush to lower rates.” He further emphasized that the current economic strength allows the Fed to approach decisions with caution.
According to CME’s FedWatch tool, markets are pricing in a 65.4% chance of a quarter-point rate cut by the Fed in December, reflecting lingering uncertainties over monetary policy adjustments.
EUR/USD Daily Technical Analysis for December 2nd
The EUR/USD is trading near 1.0550, with technical signals pointing to continued downside pressure. The weekly chart shows that while the pair made a higher low, it failed to break the previous weekly high at 1.0609, signaling limited buyer interest.
Technical indicators have rebounded slightly from oversold levels, but they lack the bullish momentum needed to sustain a significant recovery. The pair continues to trend below all major moving averages, with the 20 Simple Moving Average (SMA) reinforcing downward pressure between the 100 and 200 SMAs.
In summary, while the EUR/USD has managed to recover some ground in recent days, downside risks remain prevalent. A lack of strong buying interest and bearish technical patterns suggest further losses are possible in the near term.
