FX.co ★ EUR/USD

The euro experienced a roller coaster ride against the US dollar on Friday, initially dipping to a three-week low at 1.0340 in Asian trading before rebounding significantly above 1.0400 in North American trading. This volatility was largely attributed to the release of US Personal Consumption Expenditures (PCE) price index data, which revealed a slower-than-expected growth in November. The PCE, the Federal Reserve's preferred inflation gauge, showed that core inflation remained steady at 2.8%, below the anticipated 2.9%. Month-over-month, core inflation increased by 0.1%, falling short of expectations of 0.2% and down from the previous month's 0.3%. This slowdown in inflation growth put downward pressure on the US dollar, which is closely watched by investors as a barometer of the Fed's monetary policy stance. The US Dollar Index (DXY), which tracks the US dollar against a basket of six major currencies, initially surged to a new high of 108.50 before retreating below 108.00 on the back of the softer-than-expected inflation data. Despite this rebound, the euro remains below its 20-day simple moving average (SMA), indicating a lack of strong bullish momentum.

Technical indicators also suggest caution. The relative strength index (RSI), a momentum oscillator, has risen to 37, indicating a weakening of the selling pressure, but it remains in negative territory. The moving average convergence divergence (MACD), another technical indicator, shows a flat red bar, suggesting continued weakness, but there are signs of a potential bullish crossover. Looking ahead, if the euro can break above the 20-day SMA at 1.0520, it could retest the 1.0600 level. A sustained break above this level could open the door for further upside, with potential resistance at 1.0665 and the 50-day SMA at 1.0680. However, a drop below the key 1.0450 level could trigger a retest of the recent low at 1.0330, and potentially even the November 2022 low at 1.0220. Overall, the euro has been consolidating in a narrow range since mid-November, and the near-term outlook remains uncertain. While the softer-than-expected inflation data provided a temporary boost, the euro faces several headwinds, including the possibility of further interest rate hikes by the Fed and the ongoing energy crisis in Europe.