- The EUR/USD outlook remains choppy near 1.1600, with an eye on HICP data.
- Eurozone inflation is expected to tick up, reinforcing the ECB’s decision to hold in the December meeting.
- Fed easing odds continue to weaken the dollar, lending support to the EUR/USD.
The EUR/USD price remains flat near 1.1600 during the earlier European session on Monday, extending multi-week consolidation as traders await the Eurozone’s Harmonized Index of Consumer Prices (HICP) release on Tuesday. The pair stays within the range of 1.1400 – 1.1720 for more than a month as the markets continue to balance the dovish Fed against the steady ECB.
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Economists expect the headline HICP to climb to 2.2% YoY in November, slightly above October’s 2.1% reading. Core inflation is also expected to tick up to 2.5% from the previous 2.4%. Last week’s flash estimates have already confirmed a modest uptick, supporting the euro in the near term.
This aligns with the ECB’s inflation target of 2%, reinforcing the argument for a policy hold, while policymakers show no urge to tighten sooner. Despite a softer PMI reading, the composite index remains under 50.0, at 49.80, revealing a stable consumer activity, while retail sales are rising 0.3% MoM. These data releases highlight the Eurozone’s fragile economic condition, but not to a point where further easing is warranted.
Across the Atlantic, the US dollar remains defensive as investors price in an 87% probability of a 25-basis-point Fed rate cut at December’s meeting. Fed officials also reiterated that the easing could begin safely without derailing the progress of disinflation.
The shift has weighed on Treasury yields, with the 10-year rate falling to 4.02%, while the Dollar Index (DXY) retreated towards 99.50, its weakest level since July. The mounting expectations of Fed easing keep the greenback offered, supporting the EUR/USD.
Moving ahead, the pair is expected to stay in a choppy mode until the Eurozone inflation delivers a meaningful surprise.
EUR/USD Technical Outlook: Make or Break at 1.1600
The EUR/USD 4-hour chart reveals the pair finding adequate support near the 200-period MA, limiting the downside. Moreover, the price staying above the 20-period MA also suggests a bullish bias in the near term. However, the RSI remains flat above 50.0, indicating a lack of momentum.
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A clear breakout above 1.1600 could aim to test the November highs near 1.1655, ahead of the range highs at 1.1720. On the other hand, staying below 1.1600 could gather selling momentum, aiming for 1.1550 ahead of 1.1500.
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