EUR/USD price prediction: Limited upside amid weak eurozone economic data
EUR/USD struggles below 1.0500 as fundamentals weigh
After five consecutive bearish days that brought the EUR/USD price to a two-week low during the Asian session, a sharp recovery lifted the pair by over 0.4% in the European session, from the 1.0460 support level to test resistance at 1.0500.
But despite this rally, there is little indication that the pair will break free from its current near-term resistance as broader fundamentals continue to point to a subdued outlook for the euro.
EUR/USD price dynamics (December 2024). Source: TradingView
Although industrial production data showed an uptick in October, with a smaller-than-expected decline of 1.2% YoY compared to September's -2.2%, the outlook remains weak. The Eurozone's industrial activity showed no growth in October, further reinforcing a slowing economic trajectory. The Bundesbank’s forecast for modest GDP growth next year, following a 0.2% decline in 2024, highlights the broader economic challenges facing the region.
On the ECB front, President Christine Lagarde’s comments didn’t offer much to sway the market. However, there’s concern over the direction of Eurozone rates, as ING’s Chris Turner noted that rates will likely continue to trend lower, and the widening of the Italian-German sovereign spread is seen as a result of profit-taking rather than a market reaction to a eurozone slowdown.
EUR/USD price outlook: 200-Period EMA signals resistance near 1.0500
Technically, the 200-period Exponential Moving Average (EMA) is aligned closely with the 1.0500 resistance zone, indicating that further upside may face significant headwinds. For now, support remains at 1.0460, while the Relative Strength Index (RSI) above 50 suggests a neutral to bullish short-term momentum.
As we look towards next week, any further shifts in the ECB's stance or additional data showing signs of economic stress could determine whether the pair holds at these levels or begins a more pronounced move lower.
US Consumer Price Index (CPI) data for November weighs on the EUR/USD pair. This comes amid expectations of 25 basis points (bps) ECB rate cut at its policy meeting.
