EUR/USD. Analysis and Forecast

[Ben Graham]

Despite attempts by the EUR/USD pair to recover, it remains under pressure amid moderate strengthening of the U.S. dollar following the release of the minutes from the Federal Reserve's December monetary policy meeting. Despite short-term fluctuations, the euro is still maintaining a trajectory of solid annual growth—around 14%—supported by a noticeable divergence between the ECB's and the Fed's stances on future interest rates.

The dynamics of the U.S. currency are largely shaped by the inconsistent trade policy of Donald Trump's administration and signs of slowing economic growth in the United States. The FOMC minutes published on Tuesday once again highlighted disagreements among committee members. In particular, the interest rate was cut by only 25 basis points, which turned out to be more modest than market expectations. At the same time, the Fed tied further policy easing to a sustained decline in inflation, casting doubt on the timing of the next interest rate cut. Against this backdrop, the dollar received short-term support.

From a macroeconomic perspective, investors' attention is now focused on the upcoming U.S. data on initial jobless claims. At the same time, market activity is likely to remain limited due to seasonal factors—most trading venues will be closed on Thursday for the New Year, and Japanese markets will not reopen until the end of the week.

From a technical standpoint, the pair remains positive, as oscillators on the daily chart are in positive territory. The pair has found solid support at the 20-day SMA, currently located at 1.1725. Resistance is now at the 1.1760 level, above which the pair would accelerate toward the round level of 1.1800.

According to current data, the euro is showing the strongest gains against the New Zealand dollar, while remaining stable against most other currencies.

The material has been provided by InstaForex Company - www.instaforex.com