EUR/USD price extends bearish decline to 5-day low ahead of CPI data
Euro under pressure as ECB eyes 25 bps rate cut, US CPI data looms
EUR/USD price is under pressure as the pair continues its downward momentum, extending its decline for the fourth consecutive day.
This comes amid growing expectations that the European Central Bank (ECB) will cut interest rates by 25 basis points (bps) to 3% at its policy meeting on Thursday. Meanwhile, the US Dollar’s strength is being bolstered by anticipation of key US Consumer Price Index (CPI) data for November, further weighing on the EUR/USD pair.
The ECB rate cut would mark the third consecutive reduction, continuing the bank’s shift towards a more accommodative monetary policy. Inflation control appears to be progressing, and concerns are rising over weakening Eurozone business activity. Several ECB officials have even raised the risk of inflation below the bank’s target, citing potential tariff threats from US President-elect Donald Trump and sluggish domestic demand. As traders price in the ECB’s rate decision, all eyes are on President Christine Lagarde’s post-meeting comments, which could reveal further dovish guidance, particularly in light of political instability in Germany and France.
EUR/USD price forecast: RSI divergence hints at possible reversal
EUR/USD price action remains in a broader bullish channel and may be unable to escape its recent downward pressure. After a rebound from the base of the bullish channel at the psychological 1.0500 level on Tuesday, the pair briefly dipped in the Asian session on Wednesday before breaking below the 1.0500 level during European trading.
EUR/USD price dynamics (November-December 2024). Source: TradingView.
However, technical indicators suggest a potential reversal. The Relative Strength Index (RSI) divergence observed during Tuesday’s and Wednesday’s price dips signals that the downtrend momentum might be ready to shift. This divergence typically suggests that the bearish momentum is weakening and could pave the way for a price rebound. Either price move will hinge on the ECB’s decision and Lagarde's subsequent remarks.
EUR/USD faces strong resistance around the 1.0600 level, a barrier to further gains since November. EUR/USD bearish move, within its broader bullish channel, raises questions about the near-term direction of the currency pair.
