- The US Dollar remains under pressure as the Santa Claus rally continues on Wall Street.
- The EUR/USD needs to surpass and hold above 1.1000 to clear the way for further gains.
- The bias in the daily and 4-hour charts remains to the upside.
The EUR/USD rose for the second day in a row, approaching 1.1000 and November highs, boosted by a weaker US Dollar amid risk appetite. The overall context remains negative for the Dollar, but not necessarily positive for the Euro.
Eurostat released the final figures of November inflation, revising downward the Harmonized Index of Consumer Prices from -0.5% to -0.6%; the annual rate stood at 2.4%. On Wednesday, the October Current Account and Construction Output data will be released, and later, the preliminary Consumer Confidence for December.
Federal Reserve (Fed) and European Central Bank (ECB) officials continue to push back against market expectations. However, the interest rate market indicates significant odds of rate cuts by April. The context weighs on the US Dollar as equity prices continue to rise, and commodity prices have also joined the rally. This context reinforces expectations of lower interest rates in 2024 and puts pressure on the US Dollar.
Data from the US housing sector came in mixed on Tuesday, with Housing Starts unexpectedly rising to 1.56 million, well above the market consensus of 1.36 million. On the negative side, Building Permits declined to 1.46 million, below the market consensus of 1.47 million. More housing data is due on Wednesday with Existing Home Sales.
EUR/USD short-term technical outlook
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The EUR/USD rose further after holding above the 20-day Simple Moving Average. Technical indicators on the daily chart are biased to the upside, with the Relative Strength Index (RSI) moving north, and Momentum about to surpass the midline. However, the upside will remain limited as long as the Euro fails to convincingly close above 1.1000 on a daily basis. On the flip side, a close below 1.0860 would suggest a deeper correction ahead.
On the 4-hour chart, the price is well above the 20-SMA and above the 1.0965 resistance area, leaving scope for further gains. A slide below that level would favor a consolidation phase ahead, likely between 1.0930 and 1.0965. If the pair falls below 1.0930, the next support level is 1.0890. On the upside, above 1.0985, a test of 1.1000 should be expected, with the next target being the November high at 1.1017.
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