Analysts Keep Neutral Outlook

The Euro (EUR) slipped by 0.2% in Monday’s North American trading, nearing the 1.16 level due to the strong US Dollar (USD). Analysts at Scotiabank noted that there are limited major updates to watch for before Friday’s preliminary PMIs. The European Central Bank’s neutral stance is reflected in the consistent expectations for euro area interest rates. Interest rate differences are slightly rising, hitting new highs for November, providing some support. Still, there are short-term risks from the strong USD and reactions to US economic reports. The EUR’s technical indicators remain neutral, with the Relative Strength Index around 50. The 50-day Moving Average (1.1657) acts as near-term resistance as the Euro tries to bounce back from the upper 1.14 range seen earlier in November. Analysts are holding a neutral position until the Euro breaks above the 50-day Moving Average, expecting it to stay within a range of 1.1550 to 1.1650. The FXStreet Insights Team gathers observations from market experts to share insights from both internal and external analysts. The Euro continues to drift towards 1.16, mainly due to broad strength in the US Dollar. This trend is bolstered by last week’s US CPI, which came in higher than expected at 3.4%, strengthening the Federal Reserve’s hawkish position. Additionally, a strong jobs report for October showed the addition of 210,000 jobs, increasing demand for the dollar.

Short-Term Risks and Trading Strategies

In Europe, fundamental factors provide little support, as interest rate expectations remain flat following the European Central Bank’s neutral guidance. The preliminary Q3 GDP for the Eurozone showed a minor contraction of -0.1%, pointing to a growing economic gap with the US. As a result, the market is focusing on US economic trends rather than stable Eurozone rates. Technically, the currency pair appears limited by the 50-day moving average at around 1.1657, leading us to adopt a neutral to bearish outlook for now. Over the next few weeks, we anticipate a range between 1.1550 and 1.1650, suggesting that selling out-of-the-money call options or implementing bear call spreads may be wise strategies. This would take advantage of time decay if the pair stays within this range or moves lower. The key near-term risk is the preliminary PMI data from the US set to release this Friday. This data could either reinforce the dollar’s strength or cause a short-term shift. This situation mirrors the late 2023 trading environment where US economic strength drove market trends. A surprisingly weak US manufacturing PMI could disrupt this narrative and trigger a rise above the 1.1650 resistance. Create your live VT Markets account and start trading now.

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