Range Break in Sight: EUR/USD Nears Trigger Level That Opens Path Toward 1.19

• EUR/USD trades near the top of its yearly range as markets remain cautious.
• Weak US data could pressure US dollar and revive expectations of further Fed cuts.
• A break above 1.1800 may clear the path toward 1.19 early next year.
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EUR/USD is ending the year in a consolidation phase, trading in a range of about 1.15 to 1.19. Prices are now closer to the top of this range.

Before the holidays, several US economic data releases are due. These numbers could shape market direction toward the end of December and early January, especially since trading liquidity remains low during the Christmas and New Year period.

If the data comes in weaker, especially GDP growth, the US dollar could face downward pressure. This would happen even if inflation stays high, as weaker growth would strengthen expectations of interest rate cuts next year.

At present, the more likely outcome is that interest rates remain unchanged at the January meeting.

Fed Policy Outlook for Next Year

The Federal Reserve ended the year with a 25 basis point interest rate cut as the labor market showed signs of weakness. The Fed has a dual mandate that focuses on price stability and employment. This explains why the easing cycle continues even though inflation remains above the target.

Recent CPI data offered some relief. Inflation came in below expectations, with an annual reading of 2.7 percent.

At the start of the new year, markets usually focus on the labor market, inflation, and key measures of economic growth. If these indicators remain weak, the Federal Reserve may consider more rate cuts than the two currently expected by markets.

It is also important to remember that a change in the Fed chair is expected next year. Kevin Hassett is widely seen as the likely successor, and he may support deeper rate cuts. Such an approach would align with the policy preferences of the current US administration.

GDP and PCE Still to Come Before the Holidays

To wrap up this year’s macroeconomic calendar, markets will receive GDP data and the Federal Reserve’s preferred inflation measure, the PCE index.

For GDP, forecasts point to quarter-on-quarter growth staying above 3%. This would be seen as a positive outcome if the data meet expectations.

Since tomorrow is Christmas Eve, any market moves are likely to happen during today’s session.

EUR/USD Technical Analysis

The key level for the EURUSD pair is the December high around 1.1800. If today’s data supports a weaker US dollar, this level could be broken. That would open the path toward 1.19 in the first weeks of the new year.

The uptrend line remains the main limit for any correction. The nearest support sits around 1.17, which was tested at the end of last week.

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