EUR/USD price sees thin trading volume but bearish sentiment persist
EUR/USD dips 0.6% as dovish ECB outlook and thin holiday trading pressure Euro
EUR/USD price began the week on a bearish note, slipping by 0.6% on Monday, December 23, as the pair moved from 1.0445 to 1.0385.
The ongoing downward trend continued into Tuesday’s session, marked by thin trading volume due to the upcoming Christmas holidays. By the time of the European session, EUR/USD was hovering around 1.04000, near the low reached during Monday’s decline.
EUR/USD price dynamics (December 2024). Source: TradingView.
The weak performance of the Euro stems from dovish expectations surrounding the European Central Bank’s (ECB) monetary policy. ECB President Christine Lagarde’s recent comments, in which she suggested that inflation in the Eurozone had nearly reached its target of 2%, spooked investors, contributing to the overall bearish sentiment for the Euro. However, Lagarde also pointed out that inflation in the services sector remains elevated at 3.9%, indicating that the ECB may stay cautious about inflationary pressures. Despite easing headline inflation of 2.2%, these lingering concerns have added to market expectations that the ECB may cut rates in the near future. Traders are pricing in a 25 basis point (bps) rate cut at each of the next four ECB policy meetings, a scenario which further diminishes the outlook for the Euro.
EUR/USD price prediction: Technical indicators fuels bearish sentiment
Technical indicators also reflect the bearish trend. On the hourly chart, EUR/USD is facing resistance from a bearish trendline and the 100-period exponential moving average (EMA), both of which have kept the price in check. The Relative Strength Index (RSI) is below the 50 level, heading further downwards, suggesting that the selling pressure is likely to continue in the short term.
While EUR/USD is in a tight consolidation range due to the holiday season, the broader trend remains bearish. With further downside expected if the pair fails to break above the near-term resistance levels, immediate support lies around 1.0385 and traders will watch for any shifts in market sentiment or new economic data.
EUR/USD recovered as the Fed slowed rate cuts and the ECB focuses on disinflation. The pair reversed its downtrend, bouncing back from a multi-year low, and approaching the 1.0460 resistance level.
