EUR/USD price prediction: Downside risk increases as RSI signals further weakness
Euro struggles to sustain momentum, faces resistance at 1.0535 amid fragile market sentiment
EUR/USD rate has remained in a tight range between 1.0535 and 1.0460 for the past five consecutive days, continuing its consolidation phase.
After a brief surge to a three-day high earlier in the Asian session, the pair faced resistance at 1.0535, leading to a sharp decline. Currently, the pair is trading at 1.0480, edging closer to the critical 1.0460 support level.
EUR/USD price dynamics (December 2024). Source: TradingView.
The recent price movement reflects a fragile market sentiment, as EUR/USD struggles to maintain its prior bullish momentum. The European Central Bank (ECB) policymaker Olli Rehn’s comments on Tuesday that inflation is stabilising at the 2% target may have offered some support for the euro. However, the ECB’s cautious stance, particularly in regards to the pace and scale of potential rate cuts, continues to weigh on the single currency.
On the other hand, the US Dollar is gaining traction, supported by expectations of a slightly hawkish tilt from the Federal Reserve (Fed). Following the anticipated 25 basis point rate reduction in Wednesday’s meeting, the Fed is seen adopting a more cautious approach in January, but recent data, including a stronger-than-expected unemployment rate and slower US disinflation, has prompted analysts to forecast a potentially more hawkish Fed stance. This shift in sentiment is reflected in the upward movement of the US Dollar Index (DXY), which is currently trading near 106.700.
US retail sales data to shape EUR/USD price outlook
The pressure on EUR/USD is further compounded by the ongoing risk-off sentiment in the broader markets, as investors anticipate key US data. Traders are closely watching the US Retail Sales report for November, which is expected to show a 0.5% rise in consumer spending, slightly above October’s 0.4% growth. Should the data meet or exceed expectations, it could provide additional strength to the US Dollar and reinforce the bearish outlook for EUR/USD.
Technically, the RSI for EUR/USD continues to trend lower, approaching the 40 level, indicating further downside potential. As the pair nears the 1.0460 support zone, a break below this level could open the door for a move towards 1.0400, where further downside risk remains. The consolidation in EUR/USD could persist until clearer guidance emerges from both the ECB and the Fed, leaving traders to focus on upcoming economic data and any shifts in policy outlook.
Euro finds buying interest after five days of consecutive decline which halted further losses. Price reverses downward momentum and rises above 1.0500 amid mixed eurozone data.
