Daily Technical Analysis EUR/USD: The Pair Holds at 1.0500 Level Ahead of Fed Decision

The EUR/USD started the week with further gains, trading near 1.0520. This rise could suggest a weakening U.S. dollar, driven by soft U.S. Treasury yields ahead of the Federal Reserve’s interest rate decision scheduled for Wednesday.

The Fed is widely expected to announce a 25 basis point rate cut at its final monetary policy meeting of the year. Market analysts predict this move will be paired with a signal that the central bank is preparing for a pause, reflecting the economic strength in the U.S. and inflation that remains above the 2% target. According to CME’s FedWatch tool, market participants have nearly fully priced in the likelihood of a quarter-point cut at this week’s meeting.

Meanwhile, Fed Chairman Jerome Powell’s press conference and the updated Dot Plot projections will be closely scrutinized. Earlier this month, Powell struck a cautious tone, stating, “We can afford to be a little more cautious as we try to find a neutral point,” signaling no urgency to aggressively lower rates.

The euro found support after French President Emmanuel Macron named centrist ally François Bayrou as France’s new Prime Minister. This appointment raises hopes for political stability after the resignation of Michel Barnier following a no-confidence motion in parliament. Macron had vowed to swiftly nominate a successor to ensure stability in the government.

On Friday, Robert Holzmann, a member of the European Central Bank’s (ECB) Governing Council, remarked that lowering interest rates solely to stimulate the economy would be counterproductive. Holzmann emphasized that the ECB’s main mandate is price stability, not economic stimulation. “Lowering rates now to boost the economy would be contradictory to our current stance,” he stated, according to Bloomberg.

EUR/USD Daily Technical Analysis for December 16th

The daily chart of the EUR/USD shows that the slightly bearish 20-day Simple Moving Average (SMA) is providing dynamic resistance near 1.0525, as of the previous Wednesday. Meanwhile, the 100-day and 200-day SMAs, located more than 300 pips above the current level, suggest bearish control in the longer-term technical outlook, even if their immediate influence is less pronounced.

The Momentum Indicator is directionless around the 100 level, offering no strong signals for movement, while the Relative Strength Index (RSI) remains near 41, also lacking clear directional strength.

The technical picture indicates that bears are still in control, with the euro attempting to sustain its footing around the key 1.0500 level. Further gains would require a breakout above 1.0525, while a drop below this psychological level could reignite selling pressure toward recent lows.