Euro and US Dollar Fluctuations on Friday On Friday, the euro experienced significant fluctuations against the US dollar. Initially, during the Asian trading session, the euro dropped below the 1.0340 mark, hitting a three-week low. However, it made a comeback during the North American session, rising back above the 1.0400 level. This shift was largely attributed to the release of the US Personal Consumption Expenditures (PCE) price index data, which indicated lower-than-expected inflation for November.
PCE Data Impact The core inflation rate was reported at just 2.8%, compared to the anticipated 2.9%. Month-on-month, core inflation increased by only 0.1%, falling short of the expected 0.2% and lower than the previous month's 0.3%. This decline in inflation exerted pressure on the US dollar, a significant indicator for the Federal Reserve's monetary policy.
US Dollar Index Reaction The US Dollar Index (DXY), which measures the dollar against six major currencies, initially surged to 108.50. However, following the inflation data release, it fell below the 108.00 mark. This decline in the dollar allowed the euro to rebound, although it remained below the 20-day Simple Moving Average (SMA), reflecting weak bullish momentum.
Technical Indicators Technical indicators also suggested caution. The Relative Strength Index (RSI) stood at 37, indicating weakening selling pressure but remaining in negative territory. Meanwhile, the Moving Average Convergence Divergence (MACD) showed a flat red bar, signaling weakness, although there were signs of a potential bullish crossover.
Future Outlook for Euro Looking ahead, if the euro breaks above the 20-day SMA at 1.0520, it could potentially rise towards the 1.0600 mark, with further resistance levels at 1.0665 and the 50-day SMA at 1.0680. Conversely, if the euro drops below the 1.0450 level, it may test the recent low of 1.0330, and possibly the November 2022 low of 1.0220.
Consolidation and Challenges Since mid-November, the euro has been consolidating within a narrow range, facing challenges from the Federal Reserve's rate hikes and Europe’s ongoing energy crisis. If the euro falls below the 1.03349 level, it could reach 1.0264. However, a rebound from this level could see it return to 1.0349. On Friday, trading opened at 1.0364 and closed at 1.0450. The movements on Monday will be crucial in determining the euro’s future direction. In summary, the euro's fluctuations against the US dollar are indicative of broader economic trends and data releases, showing the delicate balance between inflation, monetary policy, and market sentiment.
