EUR/USD price eyes fresh 3-year low amid Fed rate hike delay and NFP report
EUR/USD slips amid Fed caution and dollar strength
The EUR/USD currency pair is facing renewed selling pressure as the U.S. dollar continues to benefit from the Federal Reserve’s reluctance to cut interest rates. On January 8th, EUR/USD dipped to a three-week low of 1.02760, but the pair's decline was halted the following day, offering a temporary respite.
However, in today’s European session, the pair is facing fresh downward pressure. A further decline that could see the pair drop to a fresh five-day low below the January 8th low and possibly even a fresh three-year low near 1.02200.
EUR/USD price dynamics (November 2024-January 2025). Source: TradingView
The current price decline is due to the Federal Reserve’s decision to delay an interest rate cut, as several Fed officials, such as Susan Collins from the Federal Reserve Bank of Boston, who stressed the need for caution in the face of persistent inflation and political uncertainty. These comments have given traders reason to favor the Greenback, increasing selling pressure on the euro.
On the Eurozone side, the retail sales figures released by Eurostat revealed a 1.2% year-on-year increase in November, following a revised 2.1% rise in October. However, the data failed to lift the euro, and market focus shifted towards the European Central Bank’s (ECB) policy outlook. Despite some positive news, the Eurozone’s preliminary Harmonized Index of Consumer Prices (HICP) data for December has diminished expectations for a drastic ECB rate cut which may limit EUR/USD’s losses in the short term.
EUR/USD price prediction: RSI and EMA signals further downside pressure
From a technical perspective, the daily and 4-hour Relative Strength Index (RSI) readings are both bearish, given the RSI remaining below the 50 mid-level, reinforcing the likelihood of further downside movement for EUR/USD. On the 4-hour chart, any upside attempts will likely face significant resistance from the 100 EMA and the descending channel.
Looking ahead, EUR/USD's price action will hinge on upcoming U.S. employment data and broader economic signals. If the NFP report exceeds expectations, the dollar could gain even more traction, pushing the euro lower. On the other hand, any signs of economic softness in the U.S. may offer temporary relief for EUR/USD.
The US Dollar gained support as the Federal Reserve maintained a cautious stance on further policy easing. This weighed on the EUR/USD decline which persisted into January 9th trading near 1.02990 in the European session.
