**Weekly Forex Forecast: EUR/USD, XAU/USD, XAG/USD**
*Adapted from analysis by Haresh Menghani, FXStreet. Additional context and data integrated from forex industry sources.*
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## Overview
As the financial markets move through the final week of December into the New Year, several major Forex pairs and precious metal assets hold the attention of traders. This weekly outlook focuses on the EUR/USD currency pair, along with gold (XAU/USD) and silver (XAG/USD), to provide a comprehensive perspective on the price movements, technical setups, and underlying fundamentals that could drive trading decisions in the near term.
## Macro Backdrop
### Key Factors Influencing Markets
– **Central Bank Policies:** Central bank guidance, especially by the Federal Reserve and the European Central Bank, continues to command market direction. Recent signals suggest the Fed is likely pausing its rate hikes, leading markets to anticipate possible rate cuts in 2024.
– **Economic Data Releases:** The impending release of US Nonfarm Payrolls (NFP), inflation data, and European CPI figures are crucial for near-term price action.
– **Year-End Liquidity:** Typical end-of-year trading often sees thinner liquidity, leading to increased volatility and the potential for exaggerated moves.
– **Geopolitical and Macro Risk:** Ongoing geopolitical tensions and global growth concerns are subtly supporting safe-haven assets and affecting overall sentiment.
## EUR/USD Outlook
### Technical Analysis
– **Recent Performance:** The EUR/USD pair has exhibited resilience since snapping back from multi-month lows posted in the second half of 2023.
– **Support and Resistance Levels:**
– *Immediate Resistance:* 1.1000 psychological barrier
– *Secondary Resistance:* 1.1100, aligning with the upper boundary of a long-term descending channel
– *Immediate Support:* 1.0850
– *Critical Support:* 1.0700
– **Trend Indicators:**
– The pair is trading above its 50-day and 200-day Moving Averages, showcasing positive momentum.
– RSI indicators have hovered near or above 50, reflecting ongoing bullish undertones.
– **Chart Patterns:**
– A bullish flag pattern can be observed on the daily chart, suggesting potential for further upward movement if resistance levels are breached.
### Fundamental Drivers
– **US Economic Outlook:**
– The Federal Reserve’s dovish pivot in December, with forward guidance indicating possible rate cuts, has pressured the US dollar!
– Recent US economic data has been mixed, supporting the view that the Fed’s tightening cycle might have reached its endpoint.
– **Eurozone Dynamics:**
– The euro has found support from relatively stable European economic data and expectations that the ECB may delay rate cuts versus the Fed.
– European inflation is gradually receding, but core inflation remains stubborn, providing temporary relief to the currency.
### Sentiment and Positioning
– **CFTC Data:** Currency
Read more on AUD/USD trading.