The EUR/USD exchange rate remains just above the 1.0400 level following a positive performance last Friday. Favorable global market sentiment could provide stability for the pair as trading activity appears subdued ahead of the holiday season. After experiencing a significant drop in response to the Federal Reserve’s recent policy announcements earlier in the week, the currency pair managed to rebound and finish on a high note as the week concluded. However, its recovery efforts are facing challenges as it seeks to maintain momentum in the early trading hours on Monday.
The improved risk appetite among investors and the release of lower-than-anticipated inflation figures from the United States have contributed to a weakened demand for the US Dollar. Late on Friday, Congress passed a stopgap spending bill, which prompted a rally in major Wall Street indices and led to a decline in US Treasury bond yields, further supporting the EUR/USD pair.
Recent data from the US Bureau of Economic Analysis indicated that the core Personal Consumption Expenditures (PCE) Price Index, a key indicator of inflation closely monitored by the Federal Reserve, saw a modest 0.1% increase in November, falling short of the expected 0.2% rise. This follows a higher gain of 0.3% in October, and the disappointing inflation report added pressure on the US Dollar.
Looking ahead, the Conference Board’s Consumer Confidence Index for December is slated for release on the US economic calendar. Meanwhile, U.S. stock index futures were showing gains between 0.3% and 0.7%. Given the prevailing risk-on sentiment, the US Dollar may struggle to gain traction, allowing the EUR/USD to remain stable. However, the typically low trading volumes associated with the upcoming holiday season could lead to muted volatility in the currency pair.
From a technical perspective, the Relative Strength Index (RSI) on the 4-hour chart remains just below the neutral 50 level, signaling a lack of strong upward momentum. Immediate resistance is noted at 1.0440, with further resistance expected between 1.0490 and 1.0500. On the downside, key support levels can be identified at 1.0400, 1.0350, and 1.0300.
