EUR/USD Price Braces for the European CPI Data

In Europe, investors are awaiting today’s release of the Euro Area Consumer Price Index data for December. Expectations point to YoY core inflation remain steady at 2.4%, while the YoY headline inflation is projected to ease from 2.1% to 2.0%. Such an outcome would reduce the likelihood of near-term interest rate cuts by the European Central Bank, particularly as inflation is already very close to its 2% target. This view was echoed by ECB President Christine Lagarde, who stated that interest rates are currently in a good place.

Accordingly, any change in interest rates during the first half of the year will largely depend on the release of data that would justify a cut—such as a slowdown in economic growth that warrants stimulus—or, alternatively, a renewed fall in inflation that moves it away from the 2% target.

Further Rate Cuts on the Horizon for the Federal Reserve

The United States, investors also expect the Federal Reserve to pause rate cuts at the January meeting, while still anticipating at least 50 basis points of rate reductions over the course of the year. The scope for additional cuts will depend on potential changes within the Fed’s leadership. The term of the current Federal Reserve Chair ends in May, and it is widely assumed that President Trump may appoint a more dovish successor aligned with his preference for looser monetary policy. In addition, the Supreme Court’s pending ruling in the case of Lisa Cook—a Federal Reserve Governor whom Trump removed from office before the court temporarily reinstated her—could prove pivotal. A ruling against her would open the door for President Trump to dismiss additional members of the Board of Governors, thereby expanding his influence over monetary policy.

EUR/USD – Technical Analysis

On December 24, the EUR/USD hit a muti-month high before retreating amid profit-taking by some traders. Toward the end of last year, the EUR/USD pair broke below the ascending trendline drawn from the November 11 low, signaling weakening bullish momentum and a growing inclination toward a corrective move.

Currently, the pair is moving within the trading zone between 1.1715 and 1.1510 and may be heading toward a test of the low end of this zone. A daily close below 1.1510 would signal the start of a bearish trend, potentially driving prices toward 1.1344. In this scenario, key support levels at 1.1465 and 1.1386 should be closely monitored.

Key levels to watch in the alternative scenario

If the pair records a daily close above 1.1750, this indicates a renewed return of bullish momentum and opens the door for a possible move toward a test of the September 17 high at 1.1918. In such case, the resistance level of the December 24 high, located at 1.1847 should be kept in focus.

EUR/USD – Daily Price Chart

Chart Source: ADSS Platform