The EUR/USD currency pair is currently trading positively around the 1.0400 level as it experiences a brief recovery following a significant decline earlier in the week. After a challenging Wednesday, the pair closed slightly higher on Thursday, indicating some resilience amid ongoing market dynamics. The US Dollar demonstrated strength, influenced by the Federal Reserve’s hawkish stance on interest rates and favorable economic data, but the EURO has managed to maintain its position in light of these developments.
On Wednesday, there was a notable increase in the EUR/GBP cross, highlighting the EURO ’s capability to attract capital inflows as the Pound Sterling faced selling pressure. This shift followed an announcement from the Bank of England, which opted to keep its bank rate steady at 4.75%, though a minority of the Monetary Policy Committee members unexpectedly advocated for a rate cut. This dissent within the BoE contributed to a decline in the GBP, further enhancing the EURO ’s appeal.
Looking ahead, market participants are keenly awaiting the release of the Personal Consumption Expenditures (PCE) Price Index data for November from the US Bureau of Economic Analysis. Given the recent decisions made by the Federal Reserve, market reactions to this inflation data may be relatively muted. Moreover, political uncertainties loom, especially regarding a potential government shutdown unless a new spending bill is approved by Congress by the end of the day. If US Treasury bond yields decline during the American session, it could hinder demand for the Dollar.
From a technical perspective, the Relative Strength Index (RSI) on the 4-hour chart indicates that the EUR/USD remains in a corrective phase, with key support levels identified at 1.0350, 1.0300, and 1.0240. Should the pair stabilize above the 1.0400 level, resistance may emerge at 1.0440 and 1.0500, which corresponds to important static and moving average levels. This technical backdrop suggests that while there is potential for a rebound, caution remains necessary in the current market landscape.
