During Tuesday’s early European session, the EUR/USD pair is trading in positive territory around 1.0560. However, its upward potential seems restricted considering the increasing expectations for more rate cuts by the European Central Bank (ECB) on Thursday.
ECB Rate Cut Expectations
The ECB is widely anticipated to announce a 25-basis point (bps) rate cut at its December meeting on Thursday. There’s also a possibility of an unusual 50 bps reduction. Market participants will be closely watching ECB President Christine Lagarde’s press conference after the monetary policy meeting as it might give clues about future policy direction and the timeline for additional rate cuts.
Technical Analysis – Bearish Indicators
From a technical perspective on the daily chart, the EUR/USD pair maintains a bearish feel. It remains capped below the key 100-day Exponential Moving Average (EMA). The 14-day Relative Strength Index (RSI), which is positioned below the midline around 45.20, also supports the downward momentum. This indicates that the path with the least resistance is to the downside.
Support Levels to Watch
The initial support level for the EUR/USD pair is at 1.0480, which is the low of December 3. If there’s further selling below this level, it could expose the lower limit of the Bollinger Band at 1.0445. In case of extended losses, prices could be pushed lower towards 1.0332, which is the low of November 22.
Resistance Levels to Watch
On the upside, the first barrier is near the upper boundary of the Bollinger Band at 1.0623. If there’s sustained bullish momentum, the pair could rally to 1.0787, which is the 100-day EMA. Further up, the next significant hurdle to keep an eye on is the 1.0800 psychological level.
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