EUR/USD price faces pressure as eurozone CPI impacts the pair
Euro under pressure as market volatility persists, EUR/USD hovers near 1.0500 level
EUR/USD price continues its narrow range trading as market volatility averages around 60 pips over the past six days.
The pair has remained in consolidation between 1.0535 and 1.0460, with a slight dip below the psychological level of 1.0500 as of the December 18 European/US session overlap. This weakness follows the release of the Eurozone’s Final Core CPI y/y, which came in line with expectations at 2.7%, indicating that inflation in the region is stabilising at the ECB’s target.
EUR/USD price dynamics (December 2024). Source: TradingView.
The ongoing pressure on the euro is further compounded by political instability in France, where Prime Minister Michel Barnier's government faces increasing opposition. The rejection of his budget plan by opposition parties has raised concerns about potential political upheaval and its implications for Eurozone stability. Such uncertainty has added to the downward pressure on the euro, leaving EUR/USD vulnerable to further declines.
EUR/USD weakness to continues as US Dollar strengthens on Fed expectations
Meanwhile, the US Dollar remains supported by expectations that the Federal Reserve will implement a 25 basis point interest rate cut during its December 18 FOMC meeting. Despite this anticipated cut, the broader expectation is for a more hawkish Fed stance moving forward, with the central bank's focus shifting towards potential future rate hikes. This has boosted the US Dollar, as reflected in the recent rise of the US Dollar Index (DXY) near the 107.00 level.
Technically, EUR/USD’s RSI continues to trend lower, approaching the 40 level, signaling further downside potential. Given the 1.0460 support zone in view, a break below this level could trigger a move towards the 1.0400 region, with additional downside risks should market sentiment continue to favour the US Dollar.
In summary, pressure from both political instability in the Eurozone and the growing strength of the US Dollar continue to weigh on the EUR/USD pair. Traders are focused on FOMC data, which could determine the next significant move for the pair.
EUR/USD has remained range-bound between 1.0535 and 1.0460 for the past five days. The pair struggles to maintain bullish momentum compounded by the ECB’s cautious outlook on rate cuts.
