EUR/USD. Analysis and Forecast

[Ben Graham]

The EUR/USD pair is stabilizing near the round 1.1700 level and appears to have halted the sharp decline seen the previous day. At the same time, the fundamental backdrop remains favorable for the bulls, suggesting that the path of least resistance for spot prices remains to the upside.The U.S. dollar gained momentum after the release of November Nonfarm Payrolls (NFP) data, which showed the smallest job creation figure since early October. This occurred against the backdrop of the Federal Reserve's accommodative monetary policy, which is providing support to the EUR/USD pair. According to the U.S. Bureau of Labor Statistics (BLS), the economy added just 64,000 jobs in November, compared with analysts' expectations of 50,000, while October recorded a decline of 105,000 jobs. The unemployment rate also rose to 4.6% from 4.4% in the previous month.

Despite these mixed figures, markets continue to expect the Federal Reserve to cut interest rates at least two more times next year. Expectations of a dovish stance are also being reinforced by reports of a possible change in leadership at the Federal Reserve. A Wall Street Journal article notes that U.S. President Donald Trump plans to meet with candidates for the Fed chair position, including current Governor Christopher Waller, as well as other contenders such as National Economic Council Director Kevin Hassett and former Fed Governor Kevin Warsh.

On the other hand, the euro continues to receive support amid growing confidence that the European Central Bank has completed its rate-cutting cycle. However, traders are reluctant to rush into new positions ahead of the ECB's key meeting on Thursday, as its final decisions could significantly affect demand for the euro and give fresh momentum to the EUR/USD pair. On Wednesday, final eurozone Consumer Price Index (CPI) data are also expected, which will play an important role in shaping market sentiment. These will be followed by the latest U.S. consumer inflation data, which will be a key driver of dollar demand and one of the main factors capable of triggering the next move in the EUR/USD pair.

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