The euro-dollar pair has once again returned to the 1.03 range. Buyers of EUR/USD attempted to break through the intermediate resistance level at 1.0450, which corresponds to the Tenkan-sen line on the D1 timeframe, but they were unsuccessful. Sellers have taken the lead; however, they have yet to achieve significant success. In order to resume the downward trend, sellers need to consolidate below the support level at 1.0360, which represents the lower Bollinger Bands line on the same timeframe. So far, their attempts to do this have also ended in failure.
In summary, the saying "the upper classes can't, the lower classes won't" effectively captures the current dynamics of EUR/USD.
On Friday, the U.S. Dollar Index experienced a significant drop from 108.28 to 107.30. This bearish reversal was triggered by the release of the core PCE index, which recorded a value of 2.8% in November, slightly below the forecast of 2.9%. Although this result does not indicate a slowdown in U.S. inflation, dollar bulls reacted negatively to the data. This reaction appears to be more emotional than rational, as the key inflation indicator for the Federal Reserve has remained steady at 2.8% after two months of being at 2.7%. By Monday, the Dollar Index had bounced back into the 108 range, nearly regaining all of its previous losses.
The greenback regained momentum, partly due to controversial statements made by Donald Trump. Although he won't be inaugurated as the 47th U.S. president for another 28 days, his comments are already impacting the financial markets.
China, the European Union, Canada, Mexico, Panama, and Denmark (specifically Greenland) have all faced scrutiny from Trump regarding economic and territorial disputes. Recently, Trump stated that the U.S. must establish control over Greenland, a territory owned by Denmark. This announcement coincided with his nomination for an ambassador to Denmark. In the past, he has also threatened to "reclaim" the Panama Canal from Panama, accusing the country of excessive collaboration with China and imposing high tolls on American ships.
Some analysts dismiss Trump's comments as mere political rhetoric, reminiscent of his campaign speeches. However, since the elections are long over and Trump has already secured his position, his statements should be taken seriously, as they reflect the primary directions of U.S. foreign policy under his administration.
Monday's decline in the EUR/USD exchange rate signals that the market is taking Trump's threats seriously. Despite a weak report on durable goods orders, the safe-haven dollar gained strength. Total orders dropped by 1.1%, marking the lowest level since June, while analysts had anticipated a smaller decline of 0.3%. When excluding transportation, orders fell by 0.1%, the lowest since July, contradicting expectations of a 0.3% increase.
Traders largely overlooked this report, as well as another important macroeconomic indicator: the U.S. Consumer Confidence Index from the Conference Board. After steadily increasing over the past two months—from 99.2 in September to 109.6 in October and then 111.7 in November—it was expected to rise to 112.9 in December. However, the index fell to 104.7, although the November figure was revised upward to 112.8.
Despite the mixed economic results, the demand for the dollar remains strong. This situation underscores the prevailing risk-off sentiment in the market, which has pushed macroeconomic reports to a secondary importance.
Part of this shift is due to the fact that the outcome of the Fed's January meeting is already expected. According to CME FedWatch data, there is a 95% probability that the Fed will keep its current policy unchanged. The next Fed meeting is scheduled for March, and its outcome will depend on inflation trends and the state of the U.S. labor market. Consequently, traders are largely ignoring current economic releases, as they are unlikely to affect the decisions made in January or even those in March.
From a technical standpoint, the EUR/USD currency pair exhibits a bearish bias. Currently, it is trading between the middle and lower Bollinger Bands, remaining below all Ichimoku indicator lines, which indicate a continuing bearish "Parade of Lines." The initial target for this downward movement is 1.0370, which aligns with the lower Bollinger Band on the daily chart. The primary target is set at 1.0330, corresponding to the lower Bollinger Band on the weekly chart.
