EUR/USD: The Upward Potential Is Limited Below 1.1350 Ahead Of The US PCE Inflation Report

The EUR/USD is moving below 1.1350, with the pair unable to extend its gains to the upside amid a more favorable market attitude. The most recent COVID investigations have fueled optimism for a worldwide revival.

As a result, the US Dollar and bond rates appear to have stabilized ahead of the release of crucial US PCE inflation and Durable Goods data on Thursday and Friday.

Analysis Of Technical Issues

EUR/USD CHART Source: Tradingview.com

The EUR/USD is moving above the 200-period simple moving average for the first period since October on the four-hour chart.

Aside from that, on the same chart, the Relative Strength Index (RSI) signal continues to trade below 70, indicating that the duo has more space to rise before it is technically oversold.

The price of 1.1360 (the post-ECB high) correlates with the first technical resistance level before 1.1380 (the November 30 high) and 1.1400 (the December high) (psychological level).

Alternatively, if the four-hour candle closes below 1.1320, more corrective losses toward 1.1300 (psychological level, 100-period SMA) and 1.1280 (50-period SMA) might be noticed (200-period SMA).

An Overview Of The Fundamentals

Late Wednesday, the Euro gained strength against the Dollar, pushing it over 1.1340 for the first time in almost a week, as the risk-positive market situation made it hard for the Dollar to find buyers.

A bullish turn is expected in the near term, but the 1.1320 support level must be maintained in order to keep buyers motivated.

Reuters reported on Wednesday that the coronavirus Omicron strain is responsible for fewer admissions than the Delta variation, allowing the stock market to maintain its positive mood.

In addition, due to solid advances in crucial US market indexes, the US Dollar Index (DXY), which measures the Dollar’s performance relative to a composite of six major currencies, fell into the lower bound of its three-week-old narrow trading band, which was 96.00.

The Personal Consumption Expenditures (PCE) Price Index data will be released later in the afternoon and included in the US economic docket.

According to Bloomberg, investors predict Core PCE inflation will jump to 4.5% on an annual basis in November, up from 4.1% in October. A stronger-than-expected result may rekindle inflation worries, causing the risk rally to lose momentum and the Dollar to fall in value. 

On the other hand, a weak inflation estimate is likely to limit the scope for future recovery in the DXY.

Along with the monthly Initial Jobless Claims report, the November New Home Sales and Durable Goods Orders statistics from the United States will be closely scrutinized for any new growth hints.

Before the Christmas vacation, however, risk perception is expected to remain the most critical factor influencing the Dollar’s value in the stock market.

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