CFD Trading Rate Euro vs US Dollar (EURUSD)

• EUR/USD gave back nearly half of a percent on Wednesday.
• A muted release calendar to bolster the Euro in the midweek.
• Fiber traders waiting for Friday’s PMI business activity prints.

EUR/USD bulls frayed at their ends during the midweek hump session, giving back nearly half of a percent and keeping Fiber price action hamstrung just north of the 1.0500 major handle. Thursday is a quiet showing on the economic calendar for both the Euro and the Greenback, leaving markets to sit and twiddle their thumbs until Friday’s Purchasing Managers Index (PMI) figures get released at the tail-end of the trading week.

European Central Bank (ECB) President Christine Lagarde will be making an appearance on Friday at the 34th annual European Banking Conference in Frankfurt. The ECB head is expected to hit familiar notes while discussing the state of EU monetary policy and how it impacts the banking sector, though traders will be keeping an ear out for any tidbits about the possible direction the ECB is leaning as it pertains to rate cuts in the near term.

European HCOB Purchasing Managers Index (PMI) survey results will drop on markets while ECB President Lagarde is delivering prepared notes. Pan-EU business activity survey figures are expected to hold flat in November, with the Composite PMI headliner forecast to print at a steady 50.0

The key data print this week will be S&P Purchasing Managers Index (PMI) survey results, which are due on Friday. Markets are anticipating a slight increase in Manufacturing PMI figures, expected to rise to 48.8 from the previous 48.5, while the Services component is expected to rise by a similar amount, to 55.3 from 55.0.

EUR/USD price forecast

EUR/USD is trapped near its lowest bids in over a year after tapping a 54-week low last Wednesday. A near-term bullish recovery sputtered out almost as quickly as it began, with bidders running into the much near 1.0600 and failing to capture higher ground. 

Fiber is down around 6% from September’s peaks above 1.1200, and the Euro’s technical picture has changed significantly in a short amount of time. EUR/USD is still trapped on the south end of the 50-day Exponential Moving Average (EMA), which is accelerating into the low side and poised to pass through 1.0800 in short order.

EUR/USD daily chart

European Central Bank (ECB) data showed that negotiated wage growth picked up to 5.4% in Q3, from 3.5% in Q2, Scotiabank’s Chief FX Strategist Shaun Osborne notes.  

EUR overlooks sharp pick up in negotiated wages in Q3

“Elevated wage demand was a concern for ECB hawks earlier this year and the renewed pick up in pay will make for uncomfortable reading for hawks. Policymakers are still likely to press ahead with cautious easing steps, however, believing that looser labour market conditions ahead will curb wage demand and reduce secondround price risks in 2025.”

“Swaps pricing for the December ECB policy decision is unchanged, with 29bps of easing priced in. The EUR is softer but spot is still, just about, holding within its recent consolidation range—a potential bear flag.”

EUR/USD weakness should resume more obviously on a break under short-term support (flag base) at 1.0540. Resistance is 1.0600/10.

Recent US macro data suggests that the Fed can gradually normalize monetary policy toward a more neutral stance. In the euro area, recent data indicates clear signs of weaker growth momentum and moderating labour market dynamics. Coupled with easing inflation data, with headline inflation declining below 2% for the first time in three years, the pressure on the ECB to move more quickly toward a neutral policy stance has increased, Danske Bank’s FX analysts note.

USD rally can stall toward year-end

“We expect the Fed to deliver a 25bp cut at each meeting through June of next year. Similarly, we anticipate the ECB to implement back-to-back 25bp cuts until summer 2025. If our expectations – which are below consensus for both the Fed and ECB – are correct, monetary policy alone could help stabilize EUR/USD toward year-end but is unlikely to have a notable impact over the longer term.”

“We maintain a bearish medium-term view on EUR/USD, expecting the cross to gradually decline toward 1.01 over a 12M horizon. The US election outcome reinforces our bearish outlook, given anticipated pro-growth and inflationary policies in the US, along with our expectation of relatively stronger US growth dynamics compared to the euro area in the coming year.”

“In the near term, however, we believe markets may have become overly hawkish on Fed pricing, and with downside risks to the cyclical US growth outlook, the USD rally could stall toward year-end. Significant weakness in the US economy poses a risk to our forecast, as does a marked improvement in the euro area economy, potentially supported by a rebound in the fragile global manufacturing sector.”

• EUR/USD faces pressure near 1.0600 as ECB policymakers seem more worried about the economic outlook than about controlling inflation.
• ECB’s Panetta emphasized an expansionary monetary policy stance to prevent inflation from remaining well below the bank’s target.
• Deutsche Bank sees the Fed cutting interest rates in December but expects it to be a close call.

EUR/USD continues to face pressure near 1.0600 in Wednesday’s European session, struggling to extend recovery since Friday. The major currency pair lacks adequate strength for further upside as the US Dollar (USD) remains broadly firm on expectations of fewer interest rate cuts from the Federal Reserve (Fed) in its currency policy-easing cycle.

Fed’s data-dependent approach is expected to refrain from cutting interest rates aggressively as market experts project a rebound in the United States (US) inflation and see economic growth accelerating, given that President-elected Donald Trump’s victory in both houses will allow him to implement his economic agenda smoothly.

Trump vowed to raise import tariffs universally by 10% and lower taxes, a move that would not allow the Fed to go for deeper rate cuts. For the December meeting, the Fed will likely cut its borrowing rates by 25 basis points (bps) to the 4.25%-4.50% range, but the decision remains a “close call,” according to analysts at Deutsche Bank.

At the time of writing, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, bounces to near 106.30 from the immediate support of 106.10. The USD Index exhibited sheer volatility on Tuesday due to fresh escalation in the Russia-Ukraine war.

The Greenback gained in the European session on Tuesday as Russian President Vladimir Putin’s clearance to nuclear doctrine revision against Ukraine’s launch of long-range missiles, permitted and provided by the US on President Joe Biden’s approval, strengthened its safe-haven appeal. However, the safe-haven demand lost steam after Russian Foreign Minister Sergei Lavrov said the country would "do everything possible" to avoid the onset of nuclear war, Reuters reported.

Daily digest market movers: EUR/USD struggles to hold recovery 

• The recovery move in the EUR/USD pair has stalled due to negative sentiment towards the Eurozone due to lingering geopolitical tensions, weak economic outlook, and German political uncertainty.
• European Central Bank (ECB) officials are more concerned about preserving growth than taming price pressures, as Trump’s tariffs are expected to impact the overall output. ECB policymaker and the Governor of the Bank of Italy Fabio Panetta said in a speech at Milan's Bocconi University on Tuesday, "With inflation close to target and domestic demand stagnant, restrictive monetary conditions are no longer necessary.” Panetta added that price pressures could remain well below the bank’s target if the economy doesn’t recover.
• When asked about his outlook on interest rates, Panetta said that the central bank needs to "focus on the sluggishness of the real economy" and push key borrowing rates into "neutral, or even expansionary, territory", Reuters reported.
• In this year's last monetary policy meeting on December 12, the ECB is expected to cut its Deposit Facility Rate by 25 bps to 3%. This would be the fourth interest rate cut of the year and a third straight in a row.

Technical Analysis: EUR/USD sees more downside below 1.0500

EUR/USD holds the key support of 1.0500 but struggles to extend recovery above 1.0600. The outlook of the major currency pair remains bearish as all short- to long-term daily Exponential Moving Averages (EMAs) are declining. 

The 14-day Relative Strength Index (RSI) oscillates in the bearish range of 20.00-40.00, adding to evidence of more weakness in the near term.

Looking down, the pair is expected to find a cushion near the October 2023 low at around 1.0450. On the flip side, the round-level resistance of 1.0600 will be the key barrier for the Euro bulls.

Brief decline did not result in any increase in momentum; the Euro (EUR) is expected to trade in a range between 1.0550 and 1.0620. In the longer run, weakness in EUR has stabilised; it is expected to consolidate between 1.0520 and 1.0685, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

EUR to consolidate between 1.0520 and 1.0685

24-HOUR VIEW: “Following EUR rise to 1.0607 on Monday, we indicated yesterday that ‘instead of continuing to rise, EUR is likely to trade in a 1.0560/1.0610 range today.’ Although EUR subsequently plummeted to 1.0523, it rebounded quickly to close largely unchanged at 1.0595 (-0.04%). The brief decline did not result in any increase in momentum. We continue to expect EUR to trade in a range, likely between 1.0550 and 1.0620.”

1-3 WEEKS VIEW: “We have held a negative view in EUR for about two weeks. Yesterday (19 Nov, spot at 1.0590), we noted that ‘downward momentum is beginning to fade.’ We stated, ‘A clear break of 1.0610 (‘strong resistance’ level) would mean that EUR has entered a consolidation phase.’ EUR then dropped to 1.0523, rebounded quickly to 1.0600, closing at 1.0595. While our ‘strong resistance’ level at 1.0610 has not been breached yet, downward momentum has eased considerably. To put it another way, the EUR weakness has stabilised. From here, EUR is likely to consolidate, expected to be between 1.0520 and 1.0685.”

• EUR/USD faces challenges due to safe-haven flows amid escalating Russia-Ukraine conflict.
• Traders anticipate that the incoming Trump administration's pro-inflationary policies could support the US Dollar.
• The Euro weakened due to fears over potential US trade tariffs' impact on Eurozone growth.

EUR/USD remains subdued as the US Dollar (USD) appreciates, possibly driven by the safe-haven flows amid escalating tensions in the Russia-Ukraine conflict. According to a Reuters report late Tuesday, Ukraine deployed US-supplied ATACMS missiles to strike Russian territory for the first time, signaling a significant escalation on the 1,000th day of the conflict. The EUR/USD pair trades around 1.0590 during the Asian trading hours on Wednesday.

In response, Russian President Vladimir Putin broadened Russia’s nuclear policy to include the possibility of nuclear retaliation in response to significant conventional assaults. However, market anxieties lessened somewhat when Russian Foreign Minister Sergei Lavrov reassured that the government would take all necessary measures to avert a nuclear war.

The EUR/USD received downward pressure as the Euro weakened to an over-one-year low of $1.0496 hit last week, as concerns over potential US trade tariffs' impact on Eurozone growth. Additionally, the US Dollar (USD) receives support from investors’ expectations of pro-inflationary policies from the incoming Trump administration. These policies could drive up inflation, potentially prompting the Federal Reserve to slow the pace of rate cuts.

On Wednesday, European Central Bank (ECB) President Christine Lagarde is scheduled to deliver the opening remarks at the ECB’s Conference on Financial Stability and Macroprudential Policy in Frankfurt. The ECB faces a challenging situation as European inflation remains more persistent than initially anticipated by policymakers, while the broader European economy continues to show signs of imbalance.

• EUR/USD spiraled between key levels on Tuesday as momentum remains limited.
• Fiber is looking to stage a recovery back above the 1.0600 handle, but headwinds remain.
• A lack of key momentum-driving data is hobbling bullish momentum opportunities.

EUR/USD chewed through chart paper between 1.0550 and 1.0600 levels on Tuesday, testing into the low side but staging a recovery to add a thin 0.14% on the day. Final pan-EU Harmonized Index of Consumer Prices (HICP) inflation figures did little to galvanize Fiber traders in either direction, and Greenback markets have to settle for a thin release schedule this week.

Headline HICP inflation in Europe held at a perfectly-even 2.0% YoY in October, matching preliminary figures. The data point was a non-starter in Euro markets, sparking little interest on either side of the bid-ask spread. US data remains muted until the latter half of the trading week brings unemployment claims and Retail Sales figures.

ECB President Lagarde appears on Wednesday to deliver the opening remarks at the ECB’s Conference on Financial Stability and Macroprudential Policy. The ECB is currently caught between a rock and a hard place as European inflation continues to hold stickier than European policymakers had initially expected, and the broader European economy continues to tilt lopsided.

US economic data releases remain thin in the front half of the trading week. Mid-tier Initial Jobless Claims are due on Thursday, and expected to show a slight uptick in the number of new unemployment benefits seekers for the week ended November 15. US S&P Purchasing Managers Index (PMI) activity figures will be the number to watch this week, but won’t be dropping on investors until Friday.

EUR/USD price forecast

EUR/USD has backslid nearly 6.5% top-to-bottom from September’s peak just above 1.1200, bottoming out near the 1.0500 handle before an anemic recovery into 1.0600. Despite a near-term upswing, Fiber remains staunchly in bear country, with price action trading well below the 200-day Exponential Moving Average (EMA) near 1.0900.

A swell of bearish momentum in recent weeks has kicked the 50-day EMA below the long-run moving average, and is now poised for a decline into 1.0800. If the current bullish play runs out of steam, both buyers and sellers should expect that to occur somewhere near the still-falling 50-day EMA.

EUR/USD daily chart

Final Eurozone CPI for October was confirmed at 0.3% M/M and 2.0% in the year. Core was also left unchanged at 2.7% Y/Y, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

EURCHF losses on haven demand weigh on broader EUR tone

“The German central bank’s monthly report noted that Q3 wages were up by the most in 30 years while ECB Governor Muller commented that a 25bps cut was likely at the central bank’s policy decision next month.”

“The Euro (EUR) is a moderate underperformer among the majors on the session on EUR/CHF selling which has pulled the cross back to near its August low.”

“Moderate gains in the EUR yesterday stalled around the 1.06 area and renewed losses today keep the broader tone for the EUR weak. Minor support sits at 1.05, with key support at 1.0450, last year’s low.”

• EUR/USD faces resistance near 1.0600 on Tuesday as investors see more upside in the US Dollar.
• The focus of ECB officials turns toward preserving growth rather than taming price pressures.
• Trump’s policies are expected to boost US inflation and economic growth.

EUR/USD struggles to extend Monday’s recovery above the immediate resistance of 1.0600 and edges lower in Tuesday’s European session. It appears that the recovery from the yearly low around 1.0500 last week in the major currency pair losses steam as European Central Bank (ECB) policymakers have become more worried about the Eurozone economic growth due to firm expectations of a likely trade war with the United States (US) than getting inflation under control.

Market participants are worried that protectionist policies by President-elected Donald Trump could disrupt the Eurozone’s growth potential. Though the blanket of higher import tariffs by the US will have a negative impact on all economies, the effect will be worse on the European Union (EU) as Trump mentioned, in his election campaign, that the euro bloc will "pay a big price" for not buying enough American exports.

"Protectionist tendencies could disrupt the global supply chains that are essential to European industries, with a negative impact on firms’ growth potential, competitiveness, and financial resilience," Claudia Buch, head of ECB’s supervisory arm, told the European Parliament on Monday.

Fears of Trump’s external policies have deepened the debate over whether the European Central Bank will cut interest rates by 25 or 50 basis points (bps) in the December meeting. On Monday, ECB policymaker and Governor of the Central Bank of Ireland Gabriel Makhlouf said that it is a bit far to say that an interest rate cut in December is “in the bag” and the bank needs “pretty overwhelming” evidence for an interest rate reduction by 50 bps.

During the European session, Eurostat will release revisions to the October Harmonized Index of Consumer Prices (HICP). Inflation data is expected to remain unchanged, with the headline HIPC at 2% year-over-year (YoY) and the core HIPC at 2.7% YoY.

Daily digest market movers: EURUSD struggles to hold recovery as US Dollar’s broader outlook remains firm

• EUR/USD managed to get some demand near 1.0500 last week as the US Dollar (USD) faced a slight correction after posting a fresh yearly high, with the US Dollar Index (DXY) ticking down from 107.00. The outlook of the major currency pair remains downbeat as market participants see the Greenback having more room for growth on expectations that Trump’s policies will prompt inflation and economic growth.
• According to analysts at Capital Economics, "While a period of consolidation looks likely in the near term, we have revised up our forecasts for the US Dollar and now project a further 5% appreciation by the end of 2025." Economists added, "That is based primarily on a view that President-elected Donald Trump will push ahead with the core tariff policies he proposed on the campaign trail and that the US economy will continue to outperform its major peers."
• The scenario of high inflation and strong growth will result in fewer interest rate cuts by the Federal Reserve (Fed), which will result in a sharp policy divergence with the ECB. Meanwhile, traders have also pared some bets supporting interest rate cuts by the Fed in December. According to the CME FedWatch tool, there is a 62% chance that the central bank will cut its key borrowing rates by 25 bps to the 4.25%-4.50% range, down from 77% noted a month ago.
• This week, investors will pay close attention to the preliminary S&P Global Purchasing Managers Index (PMI) data for November, which will be released on Friday. The PMI report is expected to show that the overall private sector activity improved in the US while steadying in the Eurozone. Business sentiment is also expected to have improved as Trump is confirmed to return to administration.

Technical Analysis: EUR/USD sees resistance near 1.0600

EUR/USD bounced back from the key support of 1.0500 last week but struggles to extend recovery above 1.0600 on Tuesday. The outlook of the major currency pair remains bearish as all short- to long-term Exponential Moving Averages (EMAs) are declining. 

The 14-day Relative Strength Index (RSI) oscillates in the bearish range of 20.00-40.00, adding to evidence of more weakness in the near term.

Looking down, below the year-to-date low at around 1.0500, the pair is expected to find a cushion near the October 2023 low at around 1.0450. On the flip side, the round-level resistance of 1.0600 will be the key barrier for the Euro bulls.

The Euro (EUR) rebounded as US Dollar (USD) bulls paused. Pair was last at 1.0575 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

ECB speakers to take over the narrative this week

“Daily momentum remains bearish bias though there are signs of it waning while RSI shows tentative signs of turning higher from near oversold conditions. Falling wedge and inverted hanging man (last Fri) observed. Technical signs suggest EUR bears may be feeling the fatigue and risk of short squeeze/ bullish reversal is not ruled out in the near term. Resistance at 1.06, 1.0740 (21 DMA), 1.0860 (200 DMA). Support at 1.05, 1.0450 levels.”

“This week brings plenty of ECBspeaks (about 26 officials this week), including Lagarde in Frankfurt (Fri). Overnight, Lagarde urged Europe to pool its resources in areas like defence and climate as productivity growth falters and world fragments into rival blocs.”

“Stournaras said that ECB is almost certain to cut interest rates by a quarter point in Dec while Makhlouf said there is no rush to lower rates at a faster pace. Nagel warned that trade tensions can lead to greater inflationary pressures.”

Instead of continuing to rise, the Euro (EUR) is likely to trade in a 1.0560/1.0610 range. In the longer run, Downward momentum is beginning to fade; a break of 1.0610 would indicate that EUR has entered a consolidation phase, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Downward momentum is beginning to fade

24-HOUR VIEW: “After EUR traded in a range last Friday, we indicated yesterday (Monday) that ‘There has been no increase in either downward or upward momentum, and we continue to expect EUR to trade in a range, probably between 1.0505 and 1.0585.’ We did not anticipate the rebound that sent EUR to a high of 1.0607. EUR closed on a firm note at 1.0599 (+0.55%). The rebound appears to be running ahead of itself, and instead of continuing to rise, EUR is likely to trade in a 1.0560/1.0610 range today.”

1-3 WEEKS VIEW: “We turned negative in EUR on 07 Nov, when EUR was at 1.0730. After EUR fell below our technical target of 1.0500, we indicated last Friday (15 Nov, spot at 1.0525) that ‘The price action continues to suggest EUR weakness, even though caution is warranted given the deeply oversold conditions.’ We added, ‘The next support is at last year’s low, near 1.0450.’ Yesterday, EUR rebounded strongly, reaching a high of 1.0607. Downward momentum is beginning to fade, and a clear break of 1.0610 (no change in ‘strong resistance’ level) would indicate that EUR has entered a consolidation phase.”

• EUR/USD maintains its position as the US Dollar continues its downward correction.
• The US Dollar’s downside appears restrained due to dampened odds of an imminent Fed rate cut.
• ECB President Lagarde stated that Europe should pool its resources in areas such as defense and climate.

EUR/USD remains steady with a positive bias, hovering around 1.0600 during Tuesday's Asian trading hours. The upbeat sentiment surrounding the pair is likely driven by a softer US Dollar (USD), as profit-taking follows its recent rally.

However, the downside risk for the US Dollar appears limited as Federal Reserve (Fed) Chair Jerome Powell tempered expectations for immediate rate cuts. Powell highlighted the economy's resilience, a strong labor market, and persistent inflationary pressures, stating, "The economy is not sending any signals that we need to be in a hurry to lower rates." Investors are now looking for further guidance from Fed officials later this week on the future path of US interest rates.

Additionally, the Greenback may further appreciate as investors anticipate that the incoming Trump administration will prioritize tax cuts and impose higher tariffs. These measures could fuel inflation, potentially slowing the pace of Fed rate cuts.

European Central Bank (ECB) President Christine Lagarde stated on Monday that Europe should consolidate its resources in areas such as defense and climate, as its productivity growth stagnates and the world becomes increasingly fragmented into competing blocs.

ECB President Lagarde highlighted that Europe is falling behind in innovation and productivity compared to the US and China. According to Bloomberg, the lack of a unified digital market and insufficient venture capital investment are significant barriers to technological advancement in the region.

Traders are now focused on the upcoming October Harmonized Index of Consumer Prices (HICP) data for the Euro area, set to be released on Tuesday. Attention will then shift to US Building Permits and Housing Starts data later in the North American session.

• EUR/USD clawed back further gains on Monday, adding back 0.65%.
• Despite near-term bullish momentum, Fiber remains buried deep in the bear zone.
• With another week of tepid economic data on the books, Euro remains exposed to market flows.

EUR/USD pared away further losses on Monday, rising nearly two-thirds of a percent as markets ease off the Greenback gas pedal and give the Euro a chance to come up for air. Except for a midweek appearance from European Central Bank (ECB) Christine Lagarde on Wednesday, the economic calendar remains tepid until Friday’s global rolling release of Purchasing Managers Index (PMI) figures due on both sides of the pond.

Euro markets will be sent adrift of general market flows until Wednesday, when ECB President Lagarde appears on Wednesday to deliver the opening remarks at the ECB’s Conference on Financial Stability and Macroprudential Policy. The ECB is currently caught between a rock and a hard place as European inflation continues to hold stickier than European policymakers had initially expected, and the broader European economy continues to tilt lopsided.

The rest of this week’s economic calendar remains a tepid affair on both sides of the Atlantic, though Fiber traders will be keeping their heads low on Friday when S&P PMI business activity forecasts land during both the European and US market sessions. European Manufacturing PMI figures are expected to hold steady at 46.0 MoM, with the European Services PMI component forecast to rise to 51.8 from 51.6. On the US side, overall PMIs are broadly expected to rise, with Manufacturing expected to increase to 48.8 in November from 48.5, and Services expected to tick higher to 55.2 from 55.0.

EUR/USD price forecast

EUR/USD tilted into the bullish side on Monday, reaching for the 1.0600 handle after the pair dug in its heels late last week near 1.0500. The pair still remains buried deep in bear country, with price action stuck far below the 200-day Exponential Moving Average (EMA) at 1.0884.

Fiber found a meager bounce from its lowest prices in over a year, after falling near 6.5% from September’s peaks just north of the 1.1200 handle. With the pair steeply off of its highs, a continued recovery is likely to run into technical resistance between 1.0700 and 1.0800.

EUR/USD daily chart

ECB Governor Makhlouf said he believed a ‘prudent and cautious’ approach to policy setting was appropriate which suggests he is not in favour of a bolder rate cut at the December policy decision, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

EUR consolidates above key support

“There are a few more ECB speaks on tap today—including President Lagarde. Swaps are pricing in around 30bps of easing at the December 12th decision so some recalibration of rate cut expectations could give the EUR a little support in the short run but it is marginal and the broader USD trend remains strongly bullish. Scope for EUR rebounds is limited for now.”

“The EUR is little changed on the session and short-term trading patterns have slipped into a sideways consolidation range. Price action reflects better EUR selling pressure on minor gains, however. Broader trends are EUR-bearish and key support sits just below the market at 1.0448 (2023 low).”

“A further lurch lower in the EUR is likely to develop on a break under there. Resistance is 1.0600/50.”

The Euro (EUR) is likely to trade in a range between 1.0505 and 1.0585. In the longer run, price action continues to suggest EUR weakness; the next support level is at last year’s low, near 1.0450, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

The next support level is at last year’s low, near 1.0450

24-HOUR VIEW: “The following are excerpts from our update last Friday: ‘Conditions remain oversold, but the weakness still has not quite stabilised just yet. That said, as momentum has slowed somewhat, any further decline is likely part of a lower trading range of 1.0490/1.0580. In other words, EUR is unlikely to break clearly below 1.0490.’ Our view of range trading was not wrong, even though EUR traded in a higher range of 1.0516/1.0592, closing at 1.0541 (+0.10%). There has been no increase in either downward or upward momentum, and we continue to expect EUR to trade in a range, probably between 1.0505 and 1.0585.”

1-3 WEEKS VIEW: “We turned negative in EUR on 07 Nov, when EUR was at 1.0730. After EUR fell below our technical target of 1.0500, we indicated last Friday (15 Nov, spot at 1.0525) that ‘The price action continues to suggest EUR weakness, even though caution is warranted given the deeply oversold conditions.’ We added, ‘The next support is at last year’s low, near 1.0450.’ EUR then snapped its 5-day losing streak, closing higher by 0.10% at 1.0541. Although downward momentum has slowed somewhat, only a breach of 1.0610 (no change in ‘strong resistance’ level) would indicate that EUR is not weakening further. Meanwhile, oversold conditions could lead to a couple of days of range trading.”

• EUR/USD consolidates above 1.0500 as investors look for fresh cues for Fed-ECB likely interest rate action in December.
• Fed’s Powell emphasized that there is no need to rush for rate cuts.
• Fears of a US-Eurozone trade war have escalated among investors.

EUR/USD trades sideways slightly above the psychological support of 1.0500 at the start of the week. The major currency pair consolidates as the US Dollar’s (USD) rally stalls after posting a fresh annual high. The US Dollar Index (DXY), which gauges Greenback’s value against six major currencies, looks for fresh triggers to extend its upside above the key resistance of 107.00.

According to analysts at Capital Economics, "While a period of consolidation looks likely in the near term, we have revised up our forecasts for the US Dollar and now project a further 5% appreciation by the end of 2025." Economists added, "That is based primarily on a view that President-elected Donald Trump will push ahead with the core tariff policies he proposed on the campaign trail and that the United States (US) economy will continue to outperform its major peers."

Investors are looking for fresh cues to know how Trump’s policies will guide the monetary policy action for the December meeting and 2025. Meanwhile, Federal Reserve (Fed) officials refrain from projecting the likely consequences of Trump’s policies on the economy and the interest rate policy. In the event at Federal Bank of Dallas on Thursday, Fed Chair Jerome Powell said, "I think it's too early to reach judgments here." Powell added, "We don't really know what policies will be put in place."

On the interest rate outlook, Jerome Powell said that the economy is not sending any signals that might force us to ramp up rate cuts, however, he reiterated that inflation is on a sustainable path towards the bank’s target of 2% that allows them to head towards the neutral rate.

This week, investors will focus on the preliminary S&P Global Purchasing Managers Index (PMI) data for November, which will be published on Thursday. The PMI data will show the current status of private business activity and the impact of Trump’s victory on business optimism. 

Daily digest market movers: EUR/USD stays under pressure amid worries over likely Eurozone-US trade war

• EUR/USD trades sideways, with investors focusing on European Central Bank (ECB) President Christine Lagarde’s speech at an event in Paris scheduled at 18:30 GMT. Investors would like to know how much Trump’s protectionist policies will impact the Eurozone economy. Also, market participants would look for cues about the likely interest rate cut size in the December meeting. 
• Fears of a trade war between the Eurozone and the United States have deepened after the commentary of Stephen Moore, a senior economist advisor to Donald Trump, who said at BBC radio over the weekend that the US would be less interested in a free trade deal with Britain if the government put its economic relations with the European Union (EU) ahead of those with the US, Reuters reported.
• The spark of a trade war between the Eurozone and the US arose when Trump mentioned, in his election campaign, that the euro bloc would "pay a big price" for not buying enough American exports.
• According to analysts at ING, the ECB is expected to cut interest rates again in December, but a 50 basis points (bps) cut is far from certain.

Technical Analysis: EUR/USD hovers around 1.0500

EUR/USD wobbles above the immediate support of 1.0500 in European trading hours on Monday. The outlook of the major currency pair remains bearish as all short- to long-term Exponential Moving Averages (EMAs) are declining. 

The 14-day Relative Strength Index (RSI) oscillates in the bearish range of 20.00-40.00, adding to evidence of more weakness in the near term.

Looking down, the pair is expected to find a cushion near the October 2023 low at around 1.0450. On the flip side, the round-level resistance of 1.0600 will be the key barrier for the Euro bulls.

• EUR/USD appreciates despite a negative bias amid the cautious US Federal Reserve.
• Fed Chair Powell stated that the economy is not sending any signals that we need to lower rates quickly.
• The headline inflation in the Euro Area is projected to drop sharply to 2.4% in 2024, from 5.4% in 2023.

The EUR/USD pair trades around 1.0550 during Monday’s Asian trading session, hovering near its yearly low of 1.0496, which was reached on November 14. Downside risks for the pair have intensified following cautious comments from Federal Reserve (Fed) officials and stronger-than-expected US Retail Sales data, broadly supporting the US Dollar (USD).

Last week, Fed Chair Jerome Powell tempered expectations for imminent rate cuts, emphasizing the economy's resilience, a strong labor market, and persistent inflationary pressures. Powell stated, "The economy is not sending any signals that we need to be in a hurry to lower rates."

The CME FedWatch Tool indicates that markets are pricing in nearly a 60% probability of a 25-basis-point rate cut by the Fed at its December meeting.

The US Census Bureau reported on Friday that Retail Sales increased by 0.4% month-over-month in October, exceeding the market consensus of 0.3%. Additionally, the NY Empire State Manufacturing Index for November posted an unexpected surge, coming in at 31.2 compared to the anticipated 0.7 decline, signaling robust manufacturing activity.

The Euro faces continued downward pressure as the European Central Bank (ECB) maintains a dovish stance, with a policy rate cut expected at its upcoming December meeting. Headline inflation in the Euro Area is projected to drop sharply to 2.4% in 2024, down from 5.4% in 2023, before easing more gradually to 2.1% in 2025 and 1.9% in 2026.

The European Commission's Autumn 2024 forecast projects 0.8% growth for the Euro Area in 2024, unchanged from the Spring forecast. However, the 2025 growth forecast has been revised slightly downward to 1.3% from 1.4%, while the Eurozone economy is projected to grow by 1.6% in 2026.

EU Economy Commissioner Paolo Gentiloni stated, "As inflation continues to ease and growth in private consumption and investment gains momentum, alongside record-low unemployment, growth is expected to gradually accelerate over the next two years."

The European Commission’s economic outlook anticipates a pick up in the region’s economy this year and next as consumer demand and business investment pick up, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

EUR finds support near 1.05

“Growth is expected to reach 1.3% in 2025 and 1.6% in 2026—a little better than recent assumptions. Growth in the core Eurozone economies may lag somewhat versus the larger, more peripheral countries, however. The report does not factor in risks emerging from the recent US election; trade frictions would be a significant impediment to the German economy especially.”

“Yield and fundamental headwinds for the EUR are poised to remain substantial for the foreseeable future. The short-term chart is showing some—mildly—positive signs for the EUR. A squeeze higher in the EUR in yesterday’s session from the 1.05 area (now support) may have put in a short-term low for spot via a bullish outside range signal on the 6-hour chart.”

“Oversold oscillators are trying to correct as well, which could help lift the EUR in the short run. A deeper rebound requires the EUR to push through 1.0585 resistance: above here targets 1.0650/60.”

• EUR/USD bounces after a brief test of 1.0500 seen on Thursday, its lowest level in over a year. 
• EUR/USD recovers on Friday due to profit-taking after a five-day losing streak.
• Markets see the Fed putting the December rate cut in doubt, while the ECB is expected to continue easing, pointing to more downside for the EUR/USD. 

EUR/USD slightly recovers on Friday after a brief test of the 1.0500 level the prior day. The pair has eased nearly 1.5% so far this week as markets have priced in more Trump trade effects. That move is now facing some profit-taking after a five-day losing streak for the Euro against the Greenback. All pieces of the puzzle are now in, with potentially EUR/USD starting to trade sideways in a range until President-elect Donald Trump takes office in January. 

The EUR/USD recovery on Friday looks to be triggered by some profit-taking after the steep decline this week. Economic data from France released earlier in the day showed that inflation, as measured by the Harmonized Consumer Price Index (HCPI), came a touch higher than the preliminary reading for October. However, this may not change the dovish stance of the European Central Bank (ECB), which is set to cut its policy rate in its upcoming policy meeting in December. 

On Thursday, Federal Reserve (Fed) Chairman Jerome Powell joined the camp of members within the Fed that deem another rate cut in December, however, it is not granted. Powell pointed out that the US economy and job markets are still doing very well. Meanwhile, several analysts and economists have warned of exponential inflation in the US should President-elect Donald Trump roll out all his fiscal stimulus packages for both US companies and households, alongside slapped tariffs on China and Europe. 

Daily digest market movers: EUR/USD enjoying a breather

• Japanese indices closed off rather flat to positive on Friday, while Chinese equities faced weekly losses. 
• France’s final reading for the October inflation figures came in a touch higher than expected. The HCPI rose by 1.6% year-over-year (YoY), compared to the 1.5% previously reported and expected. The monthly HCPI came in at 0.3%, as expected.
• There is some good news on the economic data front from China, where Retail Sales surged 4.8% YoY in October, beating the lower expectation of 3.8%.
• All eyes will be on the US Retail Sales data for October on Friday, with the headline number expected to show 0.3% compared to 0.4% in September. As always, markets will move more on the revisions than on the actual number. 

Technical Analysis: EUR/USD in search of some support

EUR/USD slightly recovers on Friday, with some profit-taking during the European trading session after five consecutive trading days in the red. Pure fundamentally, much upside for EUR/USD is not expected after Fed Chairman Powell dampened hopes for an interest rate cut in December, while recent French inflation figures may not change the ECB’s dovish stance. The rate differential between the two contents will become wider if the Fed does not cut and the ECB does at their next meetings in December, which is oil on the fire in favour of more downside in EUR/USD by the end of the year.   

On the upside, three firm lines in the sand can be seen. First up is the previous 2024 low, registered on April 16 at 1.0601. If that level breaks, the triple bottom from June at 1.0667 will be the next cap upwards. Further up, the 1.0800 round level, which roughly coincides with the green ascending trend line from the low of October 3, 2023, could deliver a harsh rejection before having more downside in EUR/USD. 

Looking for support, the 2023 low at 1.0448 is the next technical candidate. That would mean that once tested, a fresh two-year low is in the cards. Further down, a wider area could open up with 1.0294 as the next level to consider. 

EUR/USD: Daily Chart