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EUR/USD, Oil Forecast: Two trades to watch

Article By: ,  Senior Market Analyst
Monday 12:03 PM

EUR/USD rises with ECB rate decision & US CPI data due this week

  • ECB is expected to cut rates by 25 bps on Thursday
  • US CPI is set to rise to 2.7% on Wednesday
  • EUR/USD rises above the 20 SMA

Yeah, the U.S. dollar is moving higher towards the 10580 level as investors focus on Thursday's ECB interest rate decision and US inflation.

The market is fully pricing the ECB will cut rates by 25 basis points to 3% as many ECB policymakers have shown concerns over the risks of inflation undershooting the target owing to the weaker outlook for the region.

Recent data from the eurozone has highlighted the weaker outlook, with PMI data contracting and falling to a 10-month low.

Meanwhile, the French economy is also going through a tough moment, with the outlook becoming gloomier after the government collapsed at the end of last week.

Meanwhile, the US dollar is inching lower after strong gains last week. Following the US non-farm payroll report on Friday and comments from Federal Reserve chair Jerome Powell earlier last week, the market is pricing in an 80% probability of a 25 basis point rate cut next week, according to the CME Fed watch tool.

This week, the main focus will be U.S. consumer price index data, which is expected to show that CPI accelerated to 2.7% in November, up from 2.6% while core CPI is expected to hold steady at 3.3%

EUR/USD forecast – technical analysis

EUR/USD has recovered from the 1.0330 low reached last week, consolidating between 1.450 and 1.06.

The price has risen above the 20 SMA, and the RSI is pointing higher, keeping buyers hopeful of further gains.

A rise above 1.06 is needed to extend the recovery towards 1.07, .

Should sellers fail to retake 1.06, a move back towards 1.05 could be on the cards. Below here, 1.0450 comes into play.

Oil rises on geopolitical developments and China’s policy move

Oil prices increased by 1% on Monday after top oil importer China took its first move towards a looser management policy stance since 2010 amid aims to boost growth.

The easing monetary policy stance in China could help China's growth, which has stalled amid a collapse in the property market, which hit confidence and consumption. China's slowdown was a factor behind oil producer group OPEC+ decision last week to postpone plans for higher output until Q2 2025.

According to an official report from a meeting of top Communist Party officials, China will adopt a moderately loose monetary policy stance, as it did in 2010 when it sought to recover from the global financial crisis.

Meanwhile, uncertainty after the fall of Syrian President Bashar al-Assad is also supporting oil prices. Syrian rebels announced over the weekend that they had ousted Assad, ending the 50-year family dynasty. However, these latest developments in the Middle East have brought a new layer of political uncertainty to the market.

Separately, exporter Saudi Aramco reduced its January 2025 prices for Asian buyers to their lowest levels since 2021 on Sunday.

Oil forecast – technical analysis

Oil continues to trade within a familiar range capped on the upside by 71.50 – 72.50 and on the lower side by 67-67.50. The price has recovered from the support. Sellers will need to take out the 67.50 support zone to extend losses towards 65.25, the September low, and on to 63.60, the May 2023 low.

Any recovery would need to retake the 50 SMA and the 71.50 zone to bring 75.00 into play.

 

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