CFD Trading Rate Euro vs US Dollar (EURUSD)

EUR could decline further; the major support at 1.0600 could be just out of reach for now. In the longer run, the next level to watch is 1.0600; if EUR breaks below 1.0600, the focus will shift to 1.0555, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Below 1.0600, the focus will shift to 1.0555

24-HOUR VIEW: “While we expected EUR to trade with a downward bias yesterday, we noted that it ‘does not seem to have enough momentum to reach 1.0665.’ We underestimated the momentum, as EUR not only reached 1.0665, but also dropped further to 1.0628. It then closed on a weak note at 1.0654, down by 0.60% for the day. The rapid drop appears to be a tad overdone, but with no sign of stabilisation just yet, EUR could decline further today. However, the major support at 1.0600 could be just out of reach for now. To keep the momentum going, EUR must not break above 1.0705, with minor resistance at 1.0675.”

1-3 WEEKS VIEW: “In our latest narrative from last Thursday (07 Nov, spot at 1.0730), we indicated that the steep selloff last Wednesday ‘suggests further EUR weakness’ and ‘the levels to watch are 1.0665 (low in Jun) and the year-to-date low of 1.0600 in April.’ Yesterday (Monday), EUR broke below 1.0665, reaching a low of 1.0628. As indicated, the next level to watch is 1.0600. We will continue to hold a negative EUR view as long as 1.0760 (‘strong resistance’ level previously at 1.0815) is not breached. Looking ahead, if EUR breaks below 1.0600, the focus will shift to 1.0555.”

• EUR/USD slips as the ECB is anticipated to implement more aggressive interest rate cuts compared to the Fed.
• German Chancellor Olaf Scholz has expressed willingness to move the parliamentary confidence vote forward by several weeks.
• The US Dollar gains ground as Trump’s fiscal policies could potentially heighten inflation risks.

The EUR/USD pair continues its decline for a third consecutive session, trading around 1.0640 during Asian hours on Tuesday. Fiscal policies anticipated under US President-Elect Donald Trump may negatively impact the European economy, adding pressure on the Euro.

Expectations that the European Central Bank (ECB) will pursue more aggressive rate cuts than the Federal Reserve (Fed) are also weighing on the Euro. The ECB is anticipated to reduce rates by 25 basis points in December, with markets projecting a decline to 2% by June. The CME FedWatch Tool currently shows a 65.3% probability that the Fed will lower rates by a quarter percentage point at its December meeting.

Politically, German Chancellor Olaf Scholz has shown openness to advancing the parliamentary confidence vote by several weeks, potentially moving it up to before Christmas. This could set the stage for an early election.

The US Dollar (USD) continues to gain strength following the confirmation of Trump’s victory in the US election. Analysts believe that if Trump’s fiscal policies are enacted, they could stimulate investment, spending, and labor demand, potentially heightening inflation risks. This could lead the Federal Reserve to adopt a more hawkish monetary policy, further supporting the Greenback.

On Sunday, Minneapolis Fed President Neel Kashkari remarked that the US economy has demonstrated impressive resilience as the Fed works to control inflation. However, Kashkari emphasized that the Fed is "not all the way home" and will need additional evidence to ensure inflation fully returns to the 2% target before considering another rate cut.

Traders will likely focus on the German Harmonized Index of Consumer Prices and the ZEW Survey – Economic Sentiment, scheduled for Tuesday. Attention will then turn to the US inflation data set for release on Wednesday, which could provide key insights into future US monetary policy.

• EUR/USD fell to a fresh 30-week low on Monday.
• US markets were thinned by a holiday, but the Greenback still rose.
• Fiber traders will get a breather before key data drops in the latter half of the week.

EUR/USD slid to a fresh 30-week low on Monday, kicking off the first trading session of the week with a 0.6% decline. Fiber extended losses below the 1.0700 handle as Euro bulls evaporate as markets await key US Consumer Price Index (CPI) inflation and a fresh update to pan-European Gross Domestic Product figures, both of which are slated to publish during the back half of the trading week.

The Euro has only a mid-tier smattering of economic data on the economic calendar for the early half of the week, leaving Fiber traders to chew on the US’ upcoming CPI inflation print due on Wednesday. October’s headline US CPI is expected to accelerate to 2.6% YoY from the previous period’s 2.4%, with core CPI for the same period forecast to hold steady at 3.3% YoY. Thursday will follow up with US Producer Price Index (PPI) business-level inflation, which is also expected to tick higher to 2.9% YoY in October from 2.8%.

On the European side, hopeful Euro bulls will be looking for a hold (at best) in EU-wide GDP growth numbers slated for early Thursday. Quarterly EU GDP growth in the third quarter is forecast to hold steady at 0.4% QoQ, while annualized EU GDP growth is expected to hold steady at an unremarkable 0.9% YoY.

EUR/USD price forecast

The EUR/USD daily chart displays a strong bearish momentum, with the pair extending losses after a recent breakdown below the 200-day EMA at 1.0895. The price is now well below both the 50-day EMA at 1.0960 and the 200-day EMA, confirming the bearish trend in the short to medium term. This downward move signals that sellers are firmly in control, with the pair nearing the next support level around 1.0650. A sustained close below this support level could further accelerate the downside momentum.

The MACD indicator, situated below the chart, supports the bearish sentiment, as the MACD line is diverging from the signal line in the negative territory. The histogram has turned more negative, suggesting an increase in bearish momentum. However, it is worth noting that the MACD line remains relatively close to the signal line, indicating that momentum could still shift if buyers step in at key support levels. A bullish crossover on the MACD would be the first sign of a potential trend reversal, but as of now, such a signal remains absent.

In the near term, a break below the immediate support at 1.0650 could lead to further declines, potentially targeting the psychological level of 1.0600. Conversely, if EUR/USD finds buying interest around the current levels, it may retest the 1.0750-1.0800 resistance zone. However, with both the 50-day and 200-day EMAs trending lower, the path of least resistance appears to be to the downside. Traders will likely watch for any bullish signals to confirm a reversal, but the overall technical picture currently favors the bears.

EUR/USD daily chart

The Euro EUR continued to trade near recent lows, weighed by fresh concerns of political uncertainty in Germany (Chancellor Scholz dismissed Finance Minister and called for confidence vote on 15 Jan) and ongoing concerns of Trump win on European security and exports to US (due to potential tariffs). Pair was last seen at 1.0675 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Further downside towards 1.05 levels

“Daily momentum turned bearish while RSI fell. Support at 1.0670/80 levels (recent low) before 1.06 (2024 low). Breach below this support will open way for further downside towards 1.05 levels. Resistance at 1.0780, 1.0830/40 levels (21 DMA, 61.8% fibo retracement of 2024 low to high), 1.0870 (200 DMA).”

“But given that quite a handful of negative news maybe factored into the price of EUR in the near term, further downside may require additional catalyst. But looking out into forecast horizon, the path of least resistance may be skewed to the downside.”

Price action suggests further Euro (EUR) weakness; the levels to watch are 1.0665 and 1.0600, UOB Group FX analysts Quek Ser Leang and Peter Chia note.

Levels to watch are 1.0665 and 1.0600

24-HOUR VIEW: “Yesterday, we held the view that ‘as long as 1.0800 is not breached, EUR could drop to 1.0665 before stabilisation can be expected.’ We were also of the view that ‘a sustained break below this level seems unlikely.’ Instead of dropping to 1.0665, EUR rebounded strongly, reaching a high of 1.0824 in NY trade. The strong bounce is likely part of a broader range trading phase. Today, we expect EUR to trade between 1.0740 and 1.0840.”

1-3 WEEKS VIEW: “We highlighted yesterday (07 Nov, spot at 1.0730) that the steep selloff from two days ago suggests ‘further EUR weakness.’ We pointed out, ‘The support levels to watch are 1.0665 (low in Jun) and the year-to-date low of 1.0600 in April.’ While we did not quite expect EUR to rebound strongly, we will maintain our view as long as 1.0870 is not breached (no change in ‘strong resistance’ level from yesterday).”  

• EUR/USD remains edgy as investors await a slew of Fed speakers for fresh interest rate guidance.
• The Euro weakens as Trump’s policies are expected to weigh on the Eurozone’s exports.
• This week, investors will focus on the US inflation data for October.

EUR/USD trades cautiously near more than four-month low around 1.0700 in Monday’s European session. The major currency pair remains on tenterhooks as the election of Republican Donald Trump as US President has strengthened the US Dollar’s (USD) outlook in the long run. The US Dollar Index (DXY), which gauges Greenback’s value against six major currencies, edges higher to near 105.00.

Trump vowed to raise import tariffs and lower taxes in his election campaign, which would add to United States (US) inflationary pressures and boost debt levels. According to a November 6-7 Reuters poll, 62% of respondents – including 94% of Democrats and 34% of Republicans – said that Trump's policies likely "will push the US national debt higher."

Trump's tax cut proposals could add $7.5 trillion to the nation's debt over the next decade, according to the nonpartisan Committee for a Responsible Federal Budget.

This week, investors will pay close attention to speeches from a slew of Federal Reserve (Fed) officials to get fresh cues about the likely monetary policy action in December. According to the CME FedWatch tool, there is a 65% chance that the central bank will cut interest rates again by 25 basis points (bps) to 4.25%-4.50% in December. This would be the second quarter-to-a-percent interest rate cut by the Fed in a row, as it also reduced its key borrowing rates last week.

On the economic front, investors will focus on the US Consumer Price Index (CPI) data for October, which will be published on Thursday. The impact of the inflation data is expected to be nominal on the interest rate outlook as Fed officials are confident about the disinflation trend towards the bank’s target of 2%. However, a significant deviation from the consensus could impact the same.

Daily digest market movers: EUR/USD is under pressure amid Euro’s weak outlook

• EUR/USD remains on tenterhooks as the Euro’s (EUR) outlook is uncertain due to expectations of a global trade war after Trump’s victory in the US presidential election. In the election campaign, Trump warned that the European bloc would have to pay a big price for not buying enough American exports.
• The impact of Trump’s victory is noticeable on European economic leaders. Speaking at the European Union (EU) Summit on Friday, former European Central Bank (ECB) President Mario Draghi said, "The sense of urgency today is greater than it was a week ago," Reuters reported.
• Domestic problems in the Eurozone’s major members have also weakened the Euro’s appeal. The collapse of the German three-party coalition has come at a time when the economy is going through a rough phase. The nation managed to dodge a technical recession after expanding surprisingly by 0.2% quarterly in Q3, according to data released by the Federal Statistics Office of Germany on October 30. However, political uncertainty could lead to postponement of government spending and investments.
• Meanwhile, investors look for fresh cues about the ECB’s likely interest rate action in the December meeting. ECB policymaker and head of Austrian National Bank Robert Holzmann said there is no reason for the central bank to not cut interest rates next month at current point of time, however, the decision will be based on the economic data, which will be available in December.

Technical Analysis: EUR/USD remains lower near 1.0700

EUR/USD trades in a tight range near the more than four-month low around 1.0700. The near-term trend of the major currency pair remains bearish as the 20-day and 50-day Exponential Moving Averages (EMAs) near 1.0840 and 1.0910, respectively, continue to decline.

The 14-day Relative Strength Index (RSI) wobbles near 40.00. A bearish momentum would resume if the RSI (14) slides below that level.

The upward-sloping trendline around 1.0800, plotted from the April 16 low at around 1.0600, will act as a key resistance zone for Euro (EUR) bulls. Looking down, the shared currency pair could decline to the year-to-date (YTD) low of 1.0600.

• EUR/USD remains under pressure as the US Dollar appreciates amid likelihood of Trump increasing import tariffs and reducing corporate taxes.
• Trump’s fiscal policies could heighten inflation risks, potentially prompting the Fed to adopt a more restrictive monetary policy stance.
• German Chancellor Olaf Scholz dissolved the ruling coalition, leading to new elections to restore stability amid political uncertainty.

The EUR/USD pair continues to face downward pressure for a second consecutive session, hovering around 1.0720 during Monday’s Asian trading hours. The pair is weighed down by a stronger US Dollar (USD) and political uncertainties in Germany.

Investors are anticipating a less dovish stance from the Federal Reserve, as Donald Trump is likely to pursue his campaign promises to enact substantial tariffs, including a 10% increase on imports and a reduction in corporate taxes.

Analysts suggest that if Trump’s fiscal policies are implemented, they could lead to higher investment, spending, and labor demand, elevating inflation risks. This could prompt the Fed to adopt a more restrictive monetary policy, potentially strengthening the US Dollar and putting additional pressure on the EUR/USD pair.

However, Fed Chair Jerome Powell stated on Thursday that he doesn’t anticipate Trump’s potential return to the White House impacting the Fed’s near-term policy decisions. “We don’t guess, speculate, and we don’t assume what future government policy choices will be,” Powell noted after the bank decided to lower interest rates by 25 basis points to a range of 4.50%-4.75%, as expected.

On Friday, the preliminary University of Michigan Consumer Sentiment Index rose to 73.0 in November, up from 70.5 in October and exceeding the market’s expectation of 71.0. This upbeat data has broadly strengthened the Greenback.

In Germany, Chancellor Olaf Scholz appointed a new finance minister after dismissing the previous one, effectively dissolving the ruling coalition. This move has prompted calls from opposition and business leaders for new elections to bring stability amid the political uncertainty.

Analysts at Deutsche Bank noted that higher tariffs from the US could strain the Eurozone’s export sector, potentially impacting economic growth. “Uncertainty is high on many levels, from the exact impact of US tariffs to the timing of their implementation to how and when Europe responds,” they stated.

The Euro (EUR) rebounded overnight but continued to trade near recent lows. Pair was last seen at 1.0780 levels, OCBC’ FX analysts Frances Cheung and Christopher Wong note.

Momentum turns flat

“EUR rebounded overnight but continued to trade near recent lows, weighed by fresh concerns of political uncertainty in Germany (Chancellor Scholz dismissed Finance Minister and called for confidence vote on 15 Jan) and ongoing concerns of Trump win on European security and exports to US (due to potential tariffs).”

“Momentum turned flat while RSI fell. Risks remain skewed to the downside. Next support at 1.0660/70 levels. Resistance at 1.0740 (76.4% fibo), 1.0830 (61.8% fibo retracement of 2024 low to high).”

• EUR/USD faces significant offers near 1.0800 as the US Dollar resumes its upside trend.
• Trump’s victory has improved the US Dollar’s long-term outlook.
• The Euro is down amid Trump tariffs’ threats, German political uncertainty, and doubts over the Eurozone economic outlook.

EUR/USD faces selling pressure near the key resistance of 1.0800 in European trading hours on Friday. The major currency pair fails to extend Thursday’s recovery as the US Dollar (USD) resumes its upside journey after a sharp correction. 

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, bounces back to nearly 104.65. The index had retraced to nearly 104.20 on Thursday following the more than four-month high of 105.50 registered after Donald Trump won the presidential election in the United States (US). 

The reasoning behind the US Dollar’s recovery can be attributed to the victory of Trump, who vowed to raise import tariffs by 10% and lower corporate taxes in his election campaign. Market experts suggest that Trump’s fiscal policy, if implemented, would result in higher investment, spending and labor demand, which will elevate upside risks to inflation and force the Federal Reserve (Fed) to opt for a restrictive monetary policy stance.

Fed Chair Jerome Powell said on Thursday that he doesn’t see any near-term effect of Trump’s return to the White House regarding the central bank’s policy decisions. “We don’t guess, speculate and we don’t assume what future government policy choices will be,” Powell said after the bank decided to cut interest rates by 25 basis points (bps) to 4.50%-4.75%, as expected.

When asked about the interest rate path ahead, Powell sounded confident about the continuation of the policy-easing cycle by saying he is optimistic about inflation remaining on track to the bank’s target of 2% with some softness in labor market conditions.

Daily digest market movers: EUR/USD drops as US Dollar bounces back

• EUR/USD is also facing sharp selling pressure due to the Euro’s (EUR) underperformance against its major peers, except for Asia-Pacific currencies. The Euro is down as investors are worried about the Eurozone economic outlook due to Trump’s victory, the dissolution of Germany’s three-party coalition, and growing risks of inflation remaining below the European Central Bank’s (ECB) target of 2%.
• Higher tariffs by the US would strain the Eurozone’s export sector, likely hitting economic growth. “Uncertainty is high on many levels, from the exact impact of US tariffs to the timing of their implementation to how and when Europe responds,” Deutsche Bank analysts said. 
• Meanwhile, the Deutsche Bank also sees the ECB’s Deposit Facility rate heading to 1.5%, down from the 2.25% previously projected, due to weakening macroeconomic conditions and inflation risks falling below target. 
• The collapse of the German coalition after Chancellor Olaf Scholz dismissed Federal Minister of Finance Christian Lindner has paved the way for snap elections in early 2025. The scenario of political uncertainty limits the growth potential of an economy due to the postponement of fiscal spending by the government.

Technical Analysis: EUR/USD retreats from 1.0800

EUR/USD resumes decline after a short-lived recovery to near 1.0800 in Friday’s European session. The near-term trend of the major currency pair remains bearish as the 20-day and 50-day Exponential Moving Averages (EMAs) near 1.0860 and 1.0920, respectively, continue to decline.

The 14-day Relative Strength Index (RSI) wobbles near 40.00. A bearish momentum would resume if the RSI (14) slides below the above-mentioned level.

The upward-sloping trendline, plotted from the April 16 low of around 1.0600, will act as a key resistance zone for Euro bulls around 1.0800. Looking down, the shared currency pair could decline to the year-to-date (YTD) low of 1.0600

The Euro (EUR) is expected to trade in a range between 1.0740 and 1.0840. In the longer run, price action suggests further EUR weakness; the levels to watch are 1.0665 and 1.0600, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

EUR to trade in a range between 1.0740 and 1.0840

24-HOUR VIEW: “Yesterday, we held the view that ‘as long as 1.0800 is not breached, EUR could drop to 1.0665 before stabilisation can be expected.’ We were also of the view that ‘a sustained break below this level seems unlikely.’ Instead of dropping to 1.0665, EUR rebounded strongly, reaching a high of 1.0824 in NY trade. The strong bounce is likely part of a broader range trading phase. Today, we expect EUR to trade between 1.0740 and 1.0840.”

1-3 WEEKS VIEW: “We highlighted yesterday (07 Nov, spot at 1.0730) that the steep selloff from two days ago suggests ‘further EUR weakness.’ We pointed out, ‘The support levels to watch are 1.0665 (low in Jun) and the year-to-date low of 1.0600 in April.’ While we did not quite expect EUR to rebound strongly, we will maintain our view as long as 1.0870 is not breached (no change in ‘strong resistance’ level from yesterday).”

• EUR/USD depreciates to around 1.0780 in Friday’s Asian session, down 0.20% on the day. 
• Future Fed policy decisions are still data-dependent after a 25 bps rate cut on Thursday. 
• Trump’s proposals to raise tariffs and rising bets on ECB rate cuts exert some selling pressure on the Euro. 

The EUR/USD pair plunges to near 1.0780 amid the renewed US Dollar (USD) demand on Friday during the Asian trading hours. Also, Donald Trump’s proposals to raise tariffs weigh on the Euro (EUR) against the Greenback. Traders await the advanced US Michigan Consumer Sentiment data for November for fresh impetus, along with the speech from the Federal Reserve (Fed) Michelle Bowman on Friday. 

As widely expected, the US Fed cut its key interest rate by 25 basis points (bps) at its November meeting on Thursday. The US central bank does not want to see any further weakening of the labor market and continues to expect that inflation will sustainably decline to the Fed's 2% target. Therefore, the Fed is expected to lower interest rates further at the next few meetings, but the timing remains uncertain as the Fed will continue assessing data to determine the "pace and destination" of interest rates.

Trump has vowed a 10% tariff on imports from all countries, exerting some selling pressure on the Euro as the European Union has the second-largest trade deficit with the United States globally and is the largest exporter to the US, per JPMorgan. 

Furthermore, the European Central Bank (ECB) is seen cutting rates at a faster pace than the Fed. This, in turn, could drag the shared currency lower against the Greenback. The ECB has already reduced rates three times this year as inflation risks in the Eurozone ease faster than expected. The rising expectation of another rate reduction continues to undermine the EUR in the near term. 

• EUR/USD trimmed gains on Thursday after the Fed met market expectations on another rate cut.
• The Fed trimmed its main reference rate by 25 basis points as investors broadly predicted.
• Market participants now pivot to the question of whether or not the Fed has one more rate cut in the barrel for 2024.

EUR/USD trimmed its wick on Thursday, easing back below the 1.0800 handle after the Federal Reserve (Fed) delivered a widely-anticipated 25 bps rate trim. With November's rate call firmly in the bag, rate traders and global markets will immediately pivot to a wait-and-see for December 18, when the Fed is hoped to slap one more quarter-point rate cut on the table to round out the year's Fed rate action.

more to come...

EUR/USD daily chart

• EUR/USD recovers to near 1.0770 ahead of Fed policy while Trump's victory keeps downside bias intact
• German three-party coalition collapsed, paving the way for snap elections in early 2025.
• The Fed is expected to cut interest rates by 25 bps to 4.50%-4.75%.

EUR/USD rebounds to near 1.0770 in European trading hours on Thursday. The major currency pair bounces back after posting a more than four-month low below 1.0700 on Wednesday. The recovery comes as the US Dollar (USD) corrects ahead of the Federal Reserve’s (Fed) interest rate decision, which will be published at 19:00 GMT. 

On Wednesday, the USD Index surged more than 1.6% – the highest single-day gain in almost four years – as United States (US) citizens chose Republican Donald Trump in the presidential elections over Democratic candidate Kamala Harris. The reasoning behind the US Dollar’s rally was Trump’s promise to raise import tariffs and lower corporate taxes. On Thursday, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, drops to near 104.80 after Wednesday’s rally.

Higher tariffs would make imported products more expensive for US citizens and corporations, likely fuelling inflation. Lower taxes could also stimulate spending, contributing to price pressures as well. This scenario would make it more difficult for the Federal Reserve (Fed) to continue with its rate-cutting cycle.

As for the Fed’s monetary policy meeting, traders have priced in a 25 basis points (bps) interest rate cut that will push interest rates lower to 4.50%-4.75%, according to the CME FedWatch tool. As the Fed is widely anticipated to cut interest rates, investors will pay close attention to the monetary policy statement and Fed Chair Jerome Powell’s press conference. Investors would like to know whether the Fed will slow its policy-easing cycle if Trump implements what he promised during the campaign.

Daily digest market movers: EUR/USD rebounds despite multiple headwinds

• EUR/USD recovers sharply to near 1.0770 at the US Dollar’s expense. However, the outlook of the major currency pair remains vulnerable as the Eurozone economy is expected to face a significant burden from Trump’s protectionist policies.
• The blanket 10% tariff on all imported goods advocated by Trump would have a negative impact of 0.1% on the European Union’s (EU) Gross Domestic Product (GDP), according to a recent London School of Economics and Political Science paper.
• At the conference in London on Wednesday, European Central Bank (ECB) Vice President Luis de Guindos warned that tariffs from the US could lead to a vicious cycle of trade war globally. "If you impose a tariff, you have to bear in mind that the other party is going to react, and it’s going to retaliate, and that could give rise to a vicious circle of in terms of inflation, tariffs, which could be the worst possible result and outcome," Guindos said, Reuters reported.
• Meanwhile, the collapse of the German three-party coalition has also added to downside risks of economic growth in the shared continent. On Wednesday, German Chancellor Olaf Scholz fired Federal Minister of Finance Christian Lindner, paving the way for snap elections in early 2025. “It was necessary to prevent harm to our country,” Scholz said, CNN reported.
• On the economic data front, German Industrial Production declined by 2.5%, faster than 1% contraction expected by market participants in September on month.

Technical Analysis: EUR/USD bounces back to near 1.0770

EUR/USD rebounds to near 1.0770 after discovering buying interest below the key support of 1.0700. However, the major currency pair’s recovery appears to be lacking strength as declining 20-day and 50-day Exponential Moving Averages (EMAs) near 1.0860 and 1.0920, respectively, suggest a strong bearish trend.

Additionally, the 14-day Relative Strength Index (RSI) retreats below 40.00, suggesting a resumption of the bearish momentum.

The upward-sloping trendline around 1.0800, which is plotted from the April 16 low at around 1.0600, will act as a key resistance zone for Euro (EUR) bulls. Looking down, the shared currency pair could decline to the year-to-date (YTD) low of 1.0600.

The Euro (EUR) continued to trade with a heavy bias, in response to US elections outcome. Pair was last seen at 1.0762 levels, OCBC’ FX analysts Frances Cheung and Christopher Wong note.

Risks skewed to the downside

“Threat of Trump tariff on all imports by up to 20% can hurt EUR as US was the largest partner for EU exports of goods in 2023. There are also concerns if Trump may interfere with support for European security. Momentum turned flat while RSI fell. Risks skewed to the downside.”

“Next support at 1.0660/70 levels. Resistance at 1.0740 (76.4% fibo), 1.0830 (61.8% fibo retracement of 2024 low to high).”

As long as 1.0800 is not breached, the Euro (EUR) could drop to 1.0665 before stabilisation can be expected. In the longer run, price action suggests further EUR weakness; the levels to watch are 1.0665 and 1.0600, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

EUR can drop to 1.0665 before stabilisation

24-HOUR VIEW: “After EUR dropped sharply in early Asian trade yesterday, we indicated that ‘The sharp drop could extend but is unlikely to break the major support at 1.0780.’ However, EUR plunged through 1.0780 and dropped further to 1.0681. EUR closed at 1.0728, lower by a whopping 1.85%. After the frenetic price action yesterday, EUR is likely to settle into a more moderate range today. Overall, as long as 1.0800 is not breached, EUR could drop to 1.0665 before stabilisation can be expected. A sustained break below this level seems unlikely.”

1-3 WEEKS VIEW: “Our most recent narrative was from last Friday (01 Nov, spot at 1.0885), wherein ‘upward momentum is beginning to build, but any advance in EUR is likely to face significant resistance at 1.0935.’ EUR tested the significant resistance on Tuesday, reaching a high of 1.0936. Yesterday (Wednesday). EUR reversed abruptly and nosedived, reaching a low of 1.0681. During this move, it broke a significant weekly support level near 1.0740. The price action suggests further EUR weakness. The support levels to watch are 1.0665 (low in Jun) and the year-to-date low of 1.0600 in April. For the coming few days, any rebound is likely to remain below the ‘strong resistance’ level, currently at 1.0870.”

• EUR/USD may depreciate further as the US Dollar (USD) receives support from Trump trades.
• Republicans to gain significant authority to push through an expansive agenda focused on tax and spending cuts.
• The ECB may consider cutting rates to near zero by 2025 if Europe's economic growth falters due to Trump's tariffs.

EUR/USD holds ground after depreciating around 2% in the previous session, trading near 1.0740 during the Asian session on Thursday. The downside risk for the EUR/USD pair seems possible as the US Dollar (USD) may receive support from Trump trades following the victory of Republicans in the US election.

Donald Trump's Republicans appeared poised to potentially take control of both chambers of Congress, granting them significant authority for the first time in eight years to push through an expansive agenda focused on tax and spending cuts, energy deregulation, and border security.

According to Reuters, Republican lawmakers and aides indicated that early priorities would likely include extending Trump's 2017 tax cuts, funding the US-Mexico border wall, cutting unspent funds allocated by Democrats, dismantling the Department of Education, and limiting the powers of agencies such as the Consumer Financial Protection Bureau.

However, the US Dollar Index (DXY), which measures the value of the US Dollar against its six major peers, retreats from a four-month high of 105.44, recorded on Wednesday. The DXY trades around 104.90 amid a downward correction in US Treasury yields. US yields surged to their highest levels since July on Wednesday to 4.31% and 4.47%, respectively, on Wednesday.

Traders anticipate the US Federal Reserve (Fed) will lower its benchmark interest rate by 25 basis points at its November meeting on Thursday. The CME FedWatch Tool indicates a 98.1% probability that the Fed will make this quarter-point rate cut in November, showing strong market consensus for a modest reduction this week.

If Europe's growth stalls due to Trump's tariffs, the European Central Bank (ECB) may be forced to take aggressive action, potentially cutting rates to near zero by 2025, according to Euronews. Markets expect the ECB to lower the Deposit Facility Rate by the typical 25 basis points (bps) in December.

EU-based market data is relatively sparse this week. Pan-EU Retail Sales figures are scheduled for release on Thursday, with the EU leaders’ summit concluding on Friday. ECB President Lagarde is also set to make a follow-up appearance on Saturday.

• EUR/USD plummeted nearly 2% on Wednesday as markets bid up the US Dollar.
• Fiber saw one of its worst days in years as markets struggle to find a reason to buy the Euro.
• EU economic calendar remains tepid, leaving markets to focus on Fed rate cuts.

EUR/USD plummeted during the midweek market session, falling over 1.75% into the red and tumbling back below 1.0750 for the first time since July. Markets have broadly pivoted into the Greenback following clear results from this week’s US presidential election that sees former President Donald Trump as the frontrunner.

EU-based market data remains relatively limited this week. Pan-EU Retail Sales figures are due on Thursday, with this week’s EU leaders’ summit set to wrap up on Friday and a follow-up appearance from ECB President Lagarde slated for Saturday when the market will be closed.’

The US presidential election still isn’t over, and some key battlegrounds will take some time before a final call is made, but markets are confident that the outcome has been decided, with Republican candidate and former President Donald Trump set to win 276 electoral votes. With the Republicans also set to win back both the US Senate and Congress, investors are anticipating a pro-growth environment with more deregulation as well as additional or extended business tax cuts.

Another Federal Reserve (Fed) rate call looms ahead this week. Fed Chair Jerome Powell is widely expected to deliver another quarter-point cut to interest rates on Thursday, bringing the Fed Funds Rate down 25 bps to 4.75%. The Fed Funds Rate peaked at 5.5% in July of 2023, and investors have been clamoring for a return to a low interest rate environment that has become familiar territory since US interest rates clattered to an all-time low near 0% in early 2009.

The University of Michigan’s (UoM) Consumer Sentiment Index is waiting in the wings and slated for release on Friday. Investors expect November’s UoM sentiment indicator to climb to a six-month high of 71.0 from the previous month’s 70.5.

EUR/USD price forecast

The EUR/USD daily chart reveals a considerable setback, as the currency pair faced a sharp rejection around the 50-day EMA, currently at 1.0929, and has dropped below both the 50-day and 200-day EMAs. This technical pullback reflects a cautious outlook for the euro, particularly given recent challenges faced by the eurozone economy, including concerns over slowing growth and inflation. The strong bearish candlestick observed in the latest session suggests a swift return of market caution, as the euro failed to sustain momentum above critical moving averages.

Looking at momentum indicators, the MACD line is currently above the signal line, but recent weakness has caused the histogram bars to contract, reflecting a loss of upward momentum. The MACD's proximity to the zero line hints at the potential for a shift in sentiment; should the MACD cross into negative territory, it may signal a further downturn for EUR/USD. Investors appear wary, as current price action implies that upward moves are likely to face resistance amid prevailing market uncertainties, aligning with broader risk aversion.

In the event of further weakness, traders should keep an eye on the 1.0700 level, which marks a psychological support area and could be crucial in gauging future market sentiment. If EUR/USD holds above this support, it may encourage a period of consolidation as the market assesses broader economic data and policy signals. However, a break below could amplify selling pressure, potentially drawing the currency pair toward the year’s lows around 1.0600, especially if the eurozone’s macroeconomic picture remains subdued. Conversely, for a bullish scenario to re-emerge, the euro would need to reclaim the 1.0900 level with sustained buying interest.

EUR/USD daily chart 

The Euro (EUR) traded sharply lower, in response to US elections. Pair was last seen at 1.0718 levels, OCBC’ FX analysts Frances Cheung and Christopher Wong note.

EUR/USD is under the pressure

The sensitivity of EUR to US elections appears to have picked up by quite a fair bit. Threat of Trump tariff on all imports by up to 20% can hurt EUR as US was the largest partner for EU exports of goods in 2023.

Momentum is mild bullish but RSI fell. Resistance here at 1.0830 (61.8% fibo retracement of 2024 low to high), 1.09 (50% fibo), 1.0940 (100 DMA). Risks remain 2- way dependent on outcome of US election results (which is still trickling as we write).

EUR/USD has experienced a deeper pullback after confirming a double top, BBH’s FX analysts note.

Potential supports are located at June low of 1.0665 and 1.0600

“EUR/USD has dipped below the 200-DMA (1.0870) and the trend line drawn since October 2023 denoting prevalence of downward momentum.”

“The decline is a bit stretched but signals of rebound are not yet visible. Inability to reclaim the MA at 1.0870 could lead to persistence in down move. Next potential supports are located at June low of 1.0665 and 1.0600.”