EUR/USD rates fluctuate in a narrow range during the holiday-shortened week

EUR/USD was stuck in a narrow range around 1.0400 with low trading volumes in the holiday-shortened week.
ECB Lagarde expressed confidence that inflation would sustainably return to the bank’s 2% target sooner than previously thought.
According to UBS, the Fed will make two interest rate cuts next year, in June and September.

EUR/USD remains in a sideways trend, tracking the US dollar (USD) during North American trading hours on Tuesday. The US Dollar Index (DXY), which tracks the value of the dollar against six major currencies, is trading in a tight range above the key support at 108.00 with frail trading volumes due to holiday-related Forex markets on Wednesday and Thursday due to Christmas and Holidays Christmas appropriate day.

The broader outlook for the US dollar remains unchanged as the Federal Reserve (Fed) has opted for fewer interest rate cuts in 2025. In the latest scatter chart, the Fed signaled just two interest rate cuts in 2025 compared to four cuts projected in September. According to UBS analysts, the Fed will make two 25-basis-point interest rate cuts during its June and September policy meetings.

The latest comments from Fed officials showed they were moving to a more measured approach to cutting interest rates due to persistent inflation, better-than-previously expected labor market conditions and uncertainty about the impact of President-elect Donald Trump’s upcoming policies on the labor market. economy.

Going forward, investors will focus on U.S. jobless claims data for the week ending December 20, which will be released on Thursday. Due to the frail economic calendar in the US, investors will be paying close attention to the data. Economists estimate that the number of people applying for unemployment benefits for the first time was 218,000. and was lower than the previous publication, which amounted to PLN 220,000.

Daily market update: EUR/USD remains under significant pressure amid dovish ECB bets

During Tuesday’s session in North America, EUR/USD consolidates in a narrow range around 1.0400. The overall outlook for the major currency pair is bearish. The euro (EUR) weakened slightly on Monday after European Central Bank (ECB) President Christine Lagarde told the Financial Times (FT) in an interview that the central bank was “very close” to announcing that inflation had been brought down in sustainable to medium-term target of 2%.
However, Christine Lagarde also warned that the central bank should remain vigilant against inflation in the services sector. While headline inflation in the euro area has fallen to 2.2%, services inflation remains high at 3.9%.
When asked about her views on how the European Union (EU) should respond to the tariffs imposed by United States (US) President-elect Donald Trump, Lagarde stated that “retaliation was the wrong approach because I think overall trade restrictions followed by retaliatory, tit-for-tat, conflict-based ways of dealing with trade are simply bad for the entire global economy.”
The ECB’s dovish 2025 forecast remains unchanged amid persistent expectations that euro zone inflation will return to the 2% target. Traders expect the ECB to cut its deposit rate by 25 basis points (bps) at each of its next four policy meetings.

PRICE IN EURO today

The table below shows the current percentage change of the euro (EUR) against the main listed currencies. The euro was strongest against the Australian dollar.

	USD	EUR	GBP	JPY	BOOR	AUD	NZD	CHF
USD		0.04%	-0.26%	0.05%	-0.04%	0.18%	0.06%	0.15%
EUR	-0.04%		-0.30%	0.00%	-0.07%	0.15%	0.02%	0.11%
GBP	0.26%	0.30%		0.30%	0.23%	0.45%	0.32%	0.41%
JPY	-0.05%	0.00%	-0.30%		-0.08%	0.17%	0.02%	0.14%
BOOR	0.04%	0.07%	-0.23%	0.08%		0.21%	0.09%	0.18%
AUD	-0.18%	-0.15%	-0.45%	-0.17%	-0.21%		-0.13%	-0.03%
NZD	-0.06%	-0.02%	-0.32%	-0.02%	-0.09%	0.13%		0.09%
CHF	-0.15%	-0.11%	-0.41%	-0.14%	-0.18%	0.03%	-0.09%

The heat map shows the percentage changes of the major currencies relative to each other. The base currency is selected from the left column and the quote currency from the top row. For example, if you select Euro from the left column and move along the horizontal line to US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).

Technical analysis: EUR/USD weakens amid sturdy bearish trend

The EUR/USD rate fluctuated around 1.0400 on Tuesday, remaining above the two-year low of 1.0330. However, the outlook for the major currency pair remains strongly bearish as all short- and long-term exponential moving averages (EMAs) are falling.

The 14-day relative strength index (RSI) is oscillating in a bearish range of 20.00-40.00, indicating bearish momentum.

Looking downwards, the asset may fall near the round support at 1.0200 after breaking below the two-year low at 1.0330. Conversely, the 20-day EMA near 1.0500 will be a key barrier for Euro bulls.

Economic indicator

Initial unemployment applications

Initial unemployment benefits claims published by US Department of Labor is a measure of the number of people filing for state unemployment insurance for the first time. The larger-than-expected number indicates weakness in the U.S. labor market, weighs negatively on the U.S. economy and is negative for the U.S. dollar (USD). On the other hand, a decreasing number should be considered an increasing one for the USD.