EURUSD can not move far away from 1.052 level yet
The EURUSD currency pair, having reached the annual lows, halted the downward trend. Euro buyers managed to protect the level of 1.05 against the dollar, but it is still not enough for a significant upward rebound. Up to the price consolidation above 1.066, the initiative remains with the bears, who are quite capable of bringing EURUSD back to the last week’s levels. Fundamentals continue to point to just such a scenario.
The dollar’s rally has paused for now, but support for the US currency remains strong. In recent days, Fed officials refrained from giving direct indications regarding their next steps at the December 18 meeting. Yesterday, Kansas City Fed President Jeffrey Schmid expressed support for the rate reduction cycle, but the speed of this process may slow down after two policy easing steps in September and November. Market participants already see the chance of the Fed’s December pause at more than 40%.
ECB representatives, on the contrary, are considering the possibility of a more significant reduction in the cost of borrowing. The Bank of Italy Governor Fabio Panetta, who spoke yesterday, urged his colleagues to ease excessively tight monetary conditions in Europe as soon as possible. In his opinion, the ECB should focus on weak economic indicators at the moment. Rate cuts are necessary for strengthening business and household confidence, and will have a positive impact on consumer demand.
In this context, Amundi analysts expect EURUSD to reach parity until the end of 2024. At the moment, investors are being strictly negative towards the region, especially in light of the possible introduction of US import tariffs. The euro may strengthen significantly against the dollar in case of a sharp improvement in the EU economy, but this should be expected not earlier than next year. In the meantime, investing in dollar assets remains a more attractive strategy.
Despite the EURUSD decline that has already taken place, the RSI indicator still has not reached the oversold zone. Therefore, there are no technical obstacles for quotes to return to the level of 1.052.
Consider the following trading strategy:
Sell EURUSD at the current price. Take profit – 1.052. Stop loss – 1.066.
