Technical Analysis

EUR/USD Price Analysis – Dec 20, 2023

By LonghornFX Technical Analysis
Dec 20, 20233 min

Daily Price Outlook

Despite the bearish bias of the US dollar, the EUR/USD currency pair was unable to break its previous-day losing streak. It experienced mild losses and continues to be held below the 1.1000 mark during the early European trading hours on Wednesday. However, the downward trend can be attributed to the downbeat Eurozone data. The Eurozone Harmonized Index of Consumer Prices (HICP) for November reported a -0.6% month-on-month (MoM) figure, compared to the previous -0.5%. This result was weaker than expected, raising concerns about economic health and potentially hindering the Euro's performance.

Eurozone Inflation Dynamics and ECB Meeting Highlights

It is worth noting that Eurozone inflation in November fell short of market expectations, primarily attributed to a decline in energy prices. The Harmonized Index of Consumer Prices (HICP) for November recorded a month-on-month decrease of -0.6%, slightly weaker than anticipated. The annual inflation rate stood at 2.4%, in line with analysts' predictions. However, examining core inflation (excluding food and energy prices), it registered at 3.6% year-on-year, marking the lowest figure since April 2022.

It should be noted that the European Central Bank (ECB) recently conducted a meeting and made it clear that they did not discuss the possibility of cutting interest rates. However, they did issue a caution regarding a potential spike in December inflation due to colder weather, which typically leads to increased energy demand and prices. This situation could constrain the strength of the Euro and present a challenge for the EUR/USD pair.

US Housing Data and Upcoming Economic Indicators in Europe and the US

Moreover, Building Permits in the US declined to 1.46 million in November, falling short of the expected 1.47 million, while Housing Starts rose to 1.56 million, surpassing the consensus of 1.36 million. The mixed US housing data with a decline in Building Permits and a rise in Housing Starts could influence the EUR/USD pair, potentially contributing to market volatility.

Looking forward, the focus in the market will be on several key economic indicators. In Germany, investors will be watching the Producer Price Index (PPI) for November. For the Eurozone, attention turns to October's Current Account and Construction Output. Additionally, investors will keep their eye on December's Consumer Confidence for the Eurozone. On the U.S. side, there will be the release of Existing Home Sales data.

EUR/USD Price Chart – Source: Tradingview
EUR/USD Price Chart – Source: Tradingview

EUR/USD - Technical Analysis

As of December 20, the EUR/USD pair is navigating a delicate balance in the forex market. Currently priced at 1.0969, it shows a modest decline of 0.1%. The pair finds itself fluctuating around significant technical levels, with a pivot point established at 1.0754. Resistance levels are observed at 1.0879, 1.1021, and 1.1146, while support is anchored at 1.0611, 1.0487, and 1.0362.

The technical indicators paint a mixed picture. The Relative Strength Index (RSI) at 65 leans towards a bullish sentiment but stops short of the overbought threshold, indicating potential room for growth. However, the Moving Average Convergence Divergence (MACD) shows a near-zero value of 0.00006 against a signal of 0.00263, suggesting a lack of strong momentum in either direction.

The 50-Day Exponential Moving Average (EMA) at 1.0957 slightly underpins the current price, reinforcing a short-term bullish trend. Nevertheless, a bearish engulfing candle pattern near 1.09770 signals potential bearish bias, indicating that the pair is likely to stay bearish below 1.1005.

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