Will EUR/USD and EUR/GBP Continue to Rally?

EUR/USD Forecast – Prices, Charts, and Analysis

• EUR/USD Needs to keep this week’s gains to push further ahead.
• Talk now turns to 2024 rate cuts in the single block.
• A few releases with volatility potential on next week’s calendar

The sharp sell-off in the US dollar on Tuesday was noticeable across a range of USD pairs, none more so than in EUR/USD which jumped the best part of two big figures during the session. With a backdrop of a weaker US dollar likely going forward, some Euro-positive news could see the pair making fresh multi-month highs in the coming weeks.

After a year of global interest hikes and hawkish central bank dialogue, the rates market is now starting to fully price a round of interest rate cuts next year from a range of central banks. The latest look at Euro interest rate predictions shows the best part of 100 basis points of rate cuts by the ECB next year, with the April meeting very much a live event. With Euro Area inflation seen hitting target at the end of Q1/start of Q2, data will help decide at which meeting the ECB pulls the trigger.

The Fed and the BoE are also forecast to start cutting rates next year around mid-year with the US seen cutting 100 basis points in 2024 and the UK around three-quarters of one percent.

DailyFX Calendar

There are a few economic releases that could inject volatility into the Euro next week with the flash November PMIs that the most likely to trigger price action. Any sign of improving sentiment in Germany and the Euro Area would be a welcome relief after months of lowly readings and give the Euro a boost. In addition, ECB President Lagarde will speak after these data sets have been released and her thoughts will need to be closely parsed.

The technical setup for EUR/USD is now looking positive with the 200-dsma broken convincingly, while the 20-dsma/50-dsma crossover is adding to the positive tone. The 23.6% Fibonacci retracement is just under the current spot price at 1.0864 and may also support the pair. If the growing bullish flag pattern plays out, then resistance around the 1.1075-1.1100 zone may eventually come under pressure.

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EUR/USD Daily Price Chart

IG Retail trader data shows 43.43% of traders are net-long with the ratio of traders short to long at 1.30 to 1.The number of traders net-long is 3.59% higher than yesterday and 32.11% lower than last week, while the number of traders net-short is 7.31% lower than yesterday and 34.79% higher than last week.

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The EUR/GBP chart is also flashing a range of bullish signals, supporting the view that the pair may have more upside. The 20-dsma has moved above the 200-dsma, while the 50-dsma may shortly break above the 200-dsma, producing a ‘golden cross’. The pair have also broken above a multi-month zone of prior resistance that should now act as support in the event of any sell-off.

EUR/GBP Daily Chart

All Charts Using TradingView

What is your view on the EURO – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.