EUR/USD Pair Faces Headwinds: Technical Analysis and Fundamental

EUR/USD Pair Faces Headwinds: Technical Analysis and Fundamental Factors

The EUR/USD pair is experiencing a downward trend for the second consecutive day, retracing from its recent peak of 1.1017, the highest level since August 10. In this article, we delve into the factors influencing this decline, combining technical analysis with recent fundamental developments.

Technical Analysis:

As anticipated in our previous analysis, the H4 Divergence played out as predicted, prompting a retracement from the overbought territory to around 1.0910. From a technical standpoint, there is potential for a continued bearish impulse, with a possible pullback to the 1.085 area.

Fundamental Factors:

German inflation data released on Wednesday revealed a more significant slowdown than expected, dropping to 2.3%, its lowest level since June 2021. Core inflation, excluding volatile food and energy prices, eased to 3.8% in November, fueling speculation that the European Central Bank (ECB) may consider interest rate cuts in the coming year. This has added downward pressure on the Euro.

Simultaneously, the US Dollar is witnessing follow-through buying, recovering from a recent three-and-a-half-month low. This resurgence, coupled with pre-positioning ahead of crucial inflation data releases from both the Eurozone and the US, contributes to the ongoing pressure on the EUR/USD pair.

Conclusion:

In conclusion, the EUR/USD pair faces a convergence of technical and fundamental factors, suggesting a continuation of the current bearish trend. Traders should closely monitor key support levels, with the 1.085 area potentially serving as a point for a pullback. As the market reacts to upcoming economic data, further developments may unfold, influencing the trajectory of this major currency pair.

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