EURUSD: the FOMC week ahead

16 déc.

The most important event for the eurusd currency pair during the previous week was the ECB meeting, where euro interest rates were cut by another 25 basis points, bringing the deposit rate to 3%. In an after the meeting address to the public, ECB president Lagarde noted that more cuts might come in the early 2025, which will set the euro rates to neutral. Analysts are noting that this cut represents further ECB efforts to cope with both inflation and weakening of the Euro Zone economy. As for other macro data published during the week, the inflation rate in Germany final for November was -0,2% for the month and 2,2% on a yearly basis. Trade balance in Germany in October was positive with euro 13,4B, a bit lower from the market consensus of euro 16B.

Inflation data in the US were published during the previous week. Inflation reached 0,3% in November for the month, and 2,7% on a yearly basis. At the same time, core inflation was standing at 0,3% in November and 3,3% for the year. The Producers Price Index in November was 0,4% while core PPI was standing at 0,2% for the month.

The currency pair started the previous week by shortly testing the 1,06 resistance line, but soon switched to the downside. The lowest weekly level reached was 1,045. The eurusd is ending the week at the level of 1,05. The RSI modestly reached level of 41, but still is not ready to cross the 50 line and move further toward the overbought market side. The MA50 continues to diverge further from its MA200 counterpart, without an indication over a potential cross anytime soon.

The week ahead brings the FOMC meeting on December 18th, when the Fed will decide on the future course of interest rates. The market is expecting to see another 25 bps cut. This might impact some higher volatility on the market. As per current charts, there is some probability that eurusd might test 1,06 resistance level for one more time, but there is higher probability that the currency pair will turn back toward the 1,04 support level.

Important news to watch during the week ahead are:

EUR: HCOB Manufacturing PMI flash for December in Germany, Ifo Business Climate in Germany for December, Balance of trade in the Euro Zone in October, ZEW Economic Sentiment Index in Germany in December, Inflation Rate final for November in the Euro Zone, GfK Consumer Confidence in Germany for January, PPI index in November in Germany.

USD: Retail Sales in November, Industrial Production in November, Building Permits preliminary in November, FOMC Meeting and economic projections, Fed Press Conference scheduled for December 18th, GDP Growth Rate final for Q3, PCE Price Index in November, Personal Consumption and Spending, Michigan Consumer Sentiment final for December.