The EUR/USD currency pair remains under considerable bearish pressure as trading unfolds in Europe on Friday. Currently hovering around the 1.0450 level, the pair has experienced five consecutive days of declines, reflecting a sustained downward trend. Technical analysis indicates that there is potential for further declines before the currency pair reaches oversold conditions.
The European Central Bank (ECB) contributed to this bearish sentiment by implementing a 25 basis point reduction in key interest rates during its recent December meeting, a move that most analysts had anticipated. The ECB’s policy statement suggested that underlying inflation is expected to stabilize around the 2% target set by the Governing Council over the medium term. During the post-meeting conference, the ECB President acknowledged discussions regarding a more significant rate cut, highlighting a slower-than-expected recovery in the Eurozone economy. These comments added to the selling pressure on the EURO .
On the other side of the Atlantic, the US Dollar has gained traction, bolstered by a rise in US Treasury bond yields. This strength in the USD prevented any rebound in the EUR/USD pair. Recent data from the US Bureau of Labor Statistics revealed a 3% increase in the annual Producer Price Index for November, exceeding both market expectations and the previous month’s increase of 2.6%, further underscoring the USD’s resilience.
Looking ahead, the economic calendar for Friday appears relatively light, with no major data releases anticipated. However, with the upcoming Federal Reserve meeting drawing near, there is a potential increase in market volatility, driven by profit-taking and position adjustments as traders look to position themselves appropriately.
In terms of technical indicators, the Relative Strength Index (RSI) on the 4-hour chart has dipped below the 40 level, indicating a build-up of bearish momentum. Immediate support lies at 1.0440, with additional support levels at 1.0400 and 1.0330, while resistance can be observed at 1.0520 and 1.0600.
