Daily Technical Analysis : EUR/USD Hovers Near 1.0550, Close to Annual Lows Amid Fed Caution

The EUR/USD traded around 1.0550 during the Asian session on Monday, remaining near its yearly low of 1.0496, recorded on November 14. Downside risks for the EUR/USD have intensified following cautious comments from Federal Reserve officials and stronger-than-expected U.S. retail sales data, which have significantly bolstered the U.S. dollar.

Last week, Federal Reserve Chairman Jerome Powell tempered expectations of an imminent rate cut, citing the resilience of the economy, the strength of the labor market, and persistent inflationary pressures. Powell remarked, “The economy is not sending any signals that we need to rush to lower rates.”

CME’s FedWatch tool indicates that about 60% of analysts are pricing in the possibility of a 25-basis-point rate cut by the Fed at its December meeting.

The U.S. Census Bureau reported on Friday that retail sales increased by 0.4% month-over-month in October, surpassing the market consensus of 0.3%. Additionally, New York’s Empire State Manufacturing Index for November posted an unexpected increase to 31.2, compared to an anticipated decline of 0.7, signaling robust manufacturing activity.

Euro Under Pressure Amid Dovish ECB Outlook

The euro continues to face downward pressure as the European Central Bank maintains a dovish stance and is widely expected to cut interest rates at its upcoming December meeting. Eurozone headline inflation is projected to decline sharply to 2.4% in 2024 from 5.4% in 2023, before gradually easing to 2.1% in 2025 and 1.9% in 2026.

The European Commission’s autumn estimates for 2024 predict GDP growth of around 0.8% for the eurozone, consistent with the spring forecast. However, the growth forecast for 2025 has been slightly downgraded, from 1.4% to 1.3%, while the eurozone economy is expected to grow by 1.6% in 2026.

EUR/USD Daily Technical Analysis for November 18

The daily chart indicates that the EUR/USD is attempting to correct oversold conditions. Technical indicators have broken out of the downtrend and leveled off at extreme levels, though further gains appear unlikely at this stage. The 20-day Simple Moving Average (SMA) is turning downward almost vertically and is positioned more than 200 pips above the current level. Additionally, it remains below the flat 100-day SMA, signaling bearish dominance.

Resistance Levels:
Immediate resistance lies around the 1.0600 boundary, corresponding to the previous yearly low. A pullback above this level could extend the pair’s corrective advance, but selling interest is expected to resurface near the 1.0700 mark.

Support Levels:
A break below the 1.0500 level could lead to a further decline toward the 1.0440 price zone, which represents the October 2023 low. A subsequent drop would expose the 1.0400 level, with a potential slide toward the 1.0320/30 price zone.