Friday brings important economic data releases from the UK, Canada, and the US, focusing on retail sales and inflation indicators. These updates are expected to provide valuable insights into consumer activity and inflation trends, potentially shaping market sentiment.
In the forex market, EURUSD has continued its downward trend since peaking in September, driven by monetary policy adjustments and geopolitical factors. Central banks remain active, with the Federal Reserve recently lowering its target rate to manage inflation and employment, while the ECB reduced its key rates to support disinflation.
Overview
Friday brings important economic data releases from the UK, Canada, and the US, focusing on retail sales and inflation indicators. These updates are expected to provide valuable insights into consumer activity and inflation trends, potentially shaping market sentiment.
In the forex market, EURUSD has continued its downward trend since peaking in September, driven by monetary policy adjustments and geopolitical factors. Central banks remain active, with the Federal Reserve recently lowering its target rate to manage inflation and employment, while the ECB reduced its key rates to support disinflation.
Key Economic Events
Friday 09:00 am (GMT+2) - UK: Retail Sales m/m (GBP)
Friday 15:30 (GMT+2) - Canada: Retail Sales m/m (CAD)
Friday 15:30 (GMT+2) - USA: Core PCE Price Index m/m (USD)
Technical Analysis
Since peaking at 1.12134 on September 25, the EURUSD has been in a persistent decline, driven by monetary policy adjustments, geopolitical factors, and market sentiment. This downward momentum has led to a drop of over 7%, finding support at 1.03327 before a brief rebound. However, the recovery proved short-lived, as bulls failed to regain control, keeping prices below the 50-period Exponential Moving Average (EMA), which signals continued bearish sentiment.
Furthermore, the Momentum Oscillator and the Relative Strength Index (RSI) both underscore the downward trend, with the Momentum Oscillator falling below the 100 mark and the RSI remaining under the 50 baseline. These key indicators confirm the overall bearish outlook for the EURUSD pair.
Potential Upside Targets
Should the bulls take market control, traders may direct their attention toward the four potential resistance levels below:
1.06284: The initial resistance is estimated at 1.06284, which reflects the swing high from December 6.
1.07607: The second price target is determined at 1.07607, representing the trough marked on October 23.
1.08971: The third target is established at 1.08971, which aligns with the monthly resistance, R1, calculated using the standard Pivot Points methodology.
1.12134: An additional price target is seen at 1.12134, which corresponds to the peak marked on July 25.
Potential Downside Targets
Should the sellers maintain market control, traders may consider the four potential support levels listed below:
1.03327:The initial support level is estimated at 1.03327, which aligns with a trough marked on November 22.
1.01902: The second support level is identified at 1.01902, reflecting the 423.6% Fibonacci Extension, drawn from the swing low, 1.04526, to the swing high, 1.05337.
1.00117: The third support level is seen at 1.00117, corresponding to the monthly support, S2, calculated using the standard Pivot Points methodology.
0.99967: An additional downward target is observed at 0.99967, corresponding to the monthly support, S2, estimated using the Woodie Pivot Points methodology.
Fundamentals
On December 18, the Federal Reserve announced a 0.25% reduction in the federal funds rate, setting it at a range of 4.25%-4.5%. This move aims to support maximum employment and bring inflation closer to the 2% target. While economic activity remains strong, labor market conditions have eased slightly, and inflation, though improving, is still elevated. The Fed will continue reducing its holdings of Treasury and mortgage-backed securities and monitor data to guide future policy adjustments. The decision reflects balanced risks to employment and inflation goals, with one dissenting vote favoring unchanged rates.
On the other hand, the ECB Governing Council lowered its three key interest rates by 25 basis points, including reducing the deposit facility rate to 3.00%. This decision reflects the updated inflation outlook and the strength of monetary policy transmission as the disinflation process continues. Inflation is projected to approach the 2% target by 2026, though underlying inflation and domestic pressures remain elevated.
While financing conditions are easing, restrictive monetary policy still affects credit availability. Economic growth forecasts have been revised downward, with the economy expected to recover gradually, supported by rising real incomes and investment. The ECB emphasized a data-driven, flexible approach to future policy decisions and remains committed to stabilizing inflation sustainably at its 2% medium-term target.
Conclusion
In conclusion, Friday’s economic updates from the UK, Canada, and the US are expected to provide valuable insights into consumer activity and inflation, shaping market sentiment. The EURUSD remains under bearish pressure, reflecting broader monetary policy dynamics and geopolitical influences. Central banks, including the Federal Reserve and ECB, continue to adapt their strategies to balance growth, employment, and inflation goals, emphasizing a cautious and data-driven approach as they navigate complex economic conditions.