CFD Trading Rate Euro vs US Dollar (EURUSD)

EUR consolidated in absence of fresh catalyst. Pair was last at 1.0480 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Focus this week is on Euro-area CPI

“Bearish momentum on daily chart intact but shows signs of fading while RSI shows signs of turning higher. Bullish divergence is also observed on daily MACD.”

“Not ruling out EUR short squeeze in the near term. Resistance at 1.0510, 1.0650 (21 DMA). Key support at 1.0450 levels before 1.03 levels. Focus this week on Euro-area CPI. Upside surprise may aid the squeeze in EUR shorts.”

The Euro (EUR) is likely to trade in a relatively broad range, probably between 1.0435 and 1.0535. In the longer run, downward momentum appears to be slowing; the likelihood of EUR breaking below 1.0333 is decreasing, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Likelihood of EUR breaking below 1.0333 is decreasing

24-HOUR VIEW: “EUR dropped sharply in early Asian trade yesterday. When it was at 1.0465, we indicated that ‘downward momentum appears to be building, albeit tentatively.’ We held the view that it ‘is likely to trade with a downward bias towards 1.0420.’ However, after dropping to 1.0424, EUR soared to 1.0544 before pulling back to close at 1.0486 (-0.08%). The choppy swings provide no clarity. Overall, EUR is likely to trade in a relatively broad range today, probably between 1.0435 and 1.0535.”

1-3 WEEKS VIEW: “In our latest narrative from two days ago (25 Nov, spot at 1.0475), we highlighted that ‘while the weakness in EUR remains intact, it must break and remain below last Friday’s low of 1.0333 before further decline can be expected.’ We added, ‘The likelihood of EUR breaking below 1.0333 is not high, but it will remain intact as long as 1.0560 (‘strong resistance’) is not breached in the next few days.’ Yesterday, EUR rose to 1.0544 then pulled back. While we continue to hold the same view, downward momentum appears to be slowing. Put it another way, the likelihood of EUR breaking below is decreasing.”

• EUR/USD holds its ground ahead of US economic data releases including US PCE Price Index and quarterly GDP Annualized.
• The Euro faced challenges as US President-elect Donald Trump's renewed tariff threats have dampened market sentiment.
• The ECB is widely anticipated to implement a 25 basis point rate cut in December.

EUR/USD maintains its position after the recent losses registered in the previous session, trading around 1.0480 during the Asian hours on Wednesday. Traders await the US Personal Consumption Expenditure (PCE) Price Index and quarterly Gross Domestic Product Annualized scheduled to be released later in the North American session.

However, the US Dollar (USD) faces pressure amid bond market optimism following President-elect Donald Trump's decision to nominate fund manager Scott Bessent, a seasoned Wall Street veteran and fiscal conservative, as US Treasury Secretary.

The latest Federal Open Market Committee (FOMC) Meeting Minutes from the November 7 policy session showed that policymakers are taking a cautious approach to cutting interest rates. While the Federal Reserve's (Fed) key officials generally agreed that downside risks related to employment and inflation have diminished, they indicated that rate cuts are unlikely to speed up unless significant weaknesses emerge in the job market and inflationary pressures decline.

US President-elect Donald Trump is expected to appoint Jamieson Greer as the US Trade Representative, Bloomberg reported on Tuesday. Greer’s nomination highlights the central role of tariffs in Trump’s economic strategy.

US President-elect Donald Trump's renewed tariff threats on China, Mexico, and Canada. These developments have dampened market sentiment, adding downward pressure on European economies and weighing on the risk-sensitive Euro. As a result, the EUR/USD pair struggles to gain traction amid a challenging external environment.

In the Eurozone, markets have fully priced in a 25-basis-point (bps) rate cut by the European Central Bank (ECB) in December, with the likelihood of a larger 50 bps cut climbing to 58%. This reflects increasing market concerns about the region's economic outlook.

• EUR/USD struggled to find momentum on Tuesday, stuck near 1.0500.
• The trading week has been shortened by a US holiday on Thursday, limited Friday hours.
• EU inflation figures are due on Friday, with a thin calendar until then.

EUR/USD cycled the 1.0500 handle on Tuesday, with Fiber price action drifting into the near-term middle ground as directional momentum drains out of the pair. The economic calendar is an overall thin affair this week, with the US Thanksgiving holiday on Thursday trimming late-week market momentum. US markets will also see limited trading hours on Friday, further crimping the week’s potential for big plays.

According to the Federal Reserve's (Fed) latest Meeting Minutes, members of the Federal Open Market Committee (FOMC) continue to remain cautious about the pace of rate cuts looking forward. Overall, the Fed's key group of policymakers seemed to agree that downside risks in the employment landscape and inflation outlook have decreased. Still, the pace of rate cuts is unlikely to accelerate further unless weak points open up in the jobs market and price growth starts to slump. According to the CME's FedWatch Tool, rate traders have slightly solidified bets of a 25 bps rate trim when the Fed makes its final rate call of 2024 on December 18, with rate markets pricing in 60% odds of a quarter-point rate cut and the remaining 40% expecting a rate hold.

This week sees a firm drought of EU-based datapoints through most of the week, with a fresh round of European Harmonized Index of Consumer Prices (HICP) inflation slated for Friday. Preliminary pan-EU HICP inflation for November is set to swing higher on an annualized basis, a looming threat that European Central Bank (ECB) policymakers have been scrambling to get out in front of. According to ECB officials, a near-term uptick in broad EU inflation metrics shouldn’t be a cause for concern for investors.

Wednesday will bring another update to US Personal Consumption Expenditure Price Index (PCEPI) inflation, a key reading of price increases underpinning the US economy. Wednesday also brings a quarterly update of US Gross Domestic Product (GDP) growth. Annualized core PCEPI inflation is set to accelerate again in October and forecast to increase to 2.8% from the previous 2.7%. QoQ US GDP growth in the third quarter is expected to hold steady at 2.8%.

EUR/USD price forecast

EUR/USD caught a bid on Greenback softness to retest the 1.0500 handle earlier this week. However, Fiber buyers remain unable to break through the key technical metric neatly, and the pair is set to continue struggling with familiar technical barriers in the near term. EUR/USD price action has found some breathing room after hitting a 24-month low late last week, but the climb up is looking very far for Fiber bulls to reclaim anything approaching bullish territory.

EUR/USD daily chart

The Euro (EUR) has firmed a little overnight, with the Eurozone escaping the president-elect’s ire for now, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

EUR gains on relief trade

“Gains appear to be struggling to gain traction above 1.05, however, and while short-term spreads have narrowed slightly in the EUR’s favour over the past couple of sessions, the spread (in excess of 220bps for 2Y bond yields) remains close to the widest in around two years.”

“That spread will curb the EUR’s ability to rally significantly. Our fair value estimate for spot (based on real and nominal spreads plus equity returns) suggests equilibrium is 1.0433 currently.”

“The EUR is managing to sustain a relatively constructive tone on the charts after last week’s dip to, and rebound from, the low 1.03s. Spot has managed to push through and hold above short-term trend resistance at 1.0470 (now support) off the early Nov high for spot above 1.09. Gains may test the 1.06 area in the short run.”

• EUR/USD rebounds and returns to near 1.0500 as the US Dollar resumes its corrective trend triggered after Trump nominated Bessent for US Treasury Secretary.
• ECB policymakers support reducing interest rates gradually to abate risks of inflation becoming persistent.
• This week, investors will focus on US PCE inflation for October and Eurozone flash HICP data for November.

EUR/USD recovers intraday losses and rebounds to near the psychological resistance of 1.0500 in Tuesday’s European session. The major currency pair bounces back after a weak opening as the US Dollar (USD) surrenders most of its daily gains.

The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, started strongly and raised to near 107.50 in the early Asian session but surrenders most of its gains and falls to near 107.00 during the European trading hours.

Renewed fears boosted the US Dollar’s (USD) appeal in Tuesday’s Asian session after President-elect Donald Trump threatened to raise tariffs on other North American economies from where he expects China to have poured illicit drugs into the United States (US). Trump said he would impose 25% tariffs on Mexico and Canada and an additional 10% on China to the 60% already mentioned in his election campaign.

The US Dollar resumes its corrective trend, which started on Monday after Trump nominated seasoned hedge fund manager Scott Bessent for the role of Treasury Secretary. The USD fell sharply as investors anticipated Bessent to fulfill the economic agenda by maintaining fiscal discipline and political steadiness.

Going forward, investors will focus on the Federal Open Market Committee (FOMC) Minutes for the monetary policy meeting on November 7, which will be published at 19:00 GMT. In the November policy meeting, the Fed reduced its key borrowing rates by 25 basis points (bps) to the 4.50%-4.75% range. 

This week, investors will also focus on the US Personal Consumption Expenditure Price Index (PCE) data for October, which will be released on Wednesday. The inflation data will influence market speculation for the Federal Reserve (Fed) interest rate action in the December meeting. Traders are divided over whether the Fed will cut interest rates by 25 bps or leave them at their current levels next month, according to the CME FedWatch tool.

Daily digest market movers: EUR/USD bounces back despite multiple headwinds

• EUR/USD manages to recover intraday losses on Tuesday. Still,  investors expect the major currency pair to remain on the backfoot as European Central Bank (ECB) policymaker and President of Bundesbank Joachin Nagel cited concerns over economic weakness in the Eurozone’s largest economy, Germany, in his speech on Monday, Reuters reported.
• "Germany is stuck in a period of economic weakness which has now lasted two and a half years," Nagel said. He added, "Stagnation is likely in the final quarter of this year," and warned that the economy could fall behind other nations of the bloc. 
• Despite citing fears over growth, Nagel supported gradually reducing interest rates to ensure inflationary pressures get fully tamed. "It is important to remain cautious and to loosen monetary policy only gradually and not too quickly," Nagel said.
• Also, ECB Chief Economist Philip Lane praised the bank’s gradual policy-easing action in an interview with French newspaper Les Echos on Monday. Lane said that inflation is still higher than where the ECB wants it to be as a major decline in price pressures has come from moderation in energy costs, while inflation in the services sector is still too high.
• To know the current status of inflation in the Eurozone and its major economies, investors will focus on the flash Harmonized Index of Consumer Prices (HICP) data for November, which will be published on Thursday and Friday. Economists expect the Eurozone’s headline and core HICP – which excludes volatile components like food, energy, tobacco, and alcohol – to have accelerated to 2.4% and 2.9%, respectively, on year.

Technical Analysis: EUR/USD holds key support of 1.0330

EUR/USD regains strength and bounces back to near 1.0500 in Tuesday’s European session. The major currency pair continues to hold the near-term low of 1.0330. However, the outlook remains bearish as all short-to-long-term Exponential Moving Averages (EMAs) in the daily chart are declining, pointing to a downside trend.

The 14-day Relative Strength Index (RSI) rebounded after conditions turned oversold. However, the oscillator has cooled down, which could allow bears to take charge again.

Looking down, the November 22 low of 1.0330 will be the key support. On the flip side, the November 20 high round 1.0600 will be the key barrier for the Euro bulls.

The Euro (EUR) fell in reaction to Trump’s threat on tariffs, though there was no mention of Europe. Pair was last at 1.0509 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.        

Upside surprise may aid the squeeze in EUR shorts

“EUR’s pullback lower did not find traction. Price action suggests EUR bear may also be feeling the fatigue. Bearish momentum on daily chart intact but shows signs of fading while RSI shows signs of turning higher.”

“Bullish divergence is also observed on daily MACD. Not ruling out EUR short squeeze in the near term. Resistance at 1.0510, 1.0665 (21 DMA). Key support at 1.0450 levels before 1.03 levels. Focus this week on Euro-area CPI. Upside surprise may aid the squeeze in EUR shorts.”

The Euro (EUR) is likely to trade with a downward bias towards 1.0420; the next support at 1.0390 is not expected to come into view. In the longer run, EUR must break and remain below the 1.0333 low before further decline can be expected, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Next support at 1.0390 is not expected to come into view

24-HOUR VIEW: “After EUR traded higher at the open yesterday, we indicated that it ‘could edge higher to 1.0520.’ However, we were of the view that ‘the strong resistance at 1.0560 is unlikely to come under threat.’ Our view was not wrong, as EUR rose to 1.0530, pulling back to close at 1.0494 (+0.74%). EUR fell in early Asian trade today, and downward momentum appears to be building, albeit tentatively. Today, EUR is likely to trade with a downward bias towards 1.0420. The next support at 1.0390 is not expected to come into view. Resistance is at 1.0495, followed by 1.0520.”

1-3 WEEKS VIEW: “Our update from yesterday (25 Nov, spot at 1.0475) is still valid. As highlighted, while the weakness in EUR remains intact, it must break and remain below last Friday’s low of 1.0333 before further decline can be expected. The likelihood of EUR breaking below 1.0333 is not high, but it will remain intact as long as 1.0560 (no change in ‘strong resistance’) is not breached in the next few days. Looking ahead, if EUR breaks above 1.0560, it would suggest that the weakness from late last week has ended.”

• EUR/USD remains subdued as Trump’s tariff plans dampen the market sentiment.
• President-elect Donald Trump plans to impose tariffs on imports from Mexico, Canada and China.
• The Euro struggles due to growing concerns over downside risks to the Eurozone economy.

EUR/USD pares its daily losses, trading around 1.0490 during the Asian hours on Tuesday. However, the pair may continue to depreciate due to dampened market sentiment following President-elect Donald Trump’s announcement of planning to impose a 25% tariff on imports from Mexico and Canada, along with a 10% hike in tariffs on all Chinese goods entering the United States (US).

The US Dollar (USD) remains subdued following comments from Federal Reserve (Fed) officials on Tuesday. However, the USD’s downside risks are limited, supported by strong preliminary S&P Global US Purchasing Managers’ Index (PMI) data. These robust figures have strengthened expectations that the Fed may adopt a more gradual approach to further rate cuts.

Federal Reserve Bank of Chicago President Austan Goolsbee indicated that the Fed is likely to continue lowering interest rates toward a neutral stance that neither stimulates nor restricts economic activity. Meanwhile, Minneapolis Fed President Neel Kashkari highlighted that it remains appropriate to consider another rate cut at the Fed’s December meeting, according to Bloomberg.

The Euro faces pressure amid growing concerns over downside risks to the Eurozone economy. These risks stem from uncertainties related to a potential second Trump administration, the ongoing war in Ukraine, and political instability in Germany and France. 

Markets have already fully priced in a 25 basis point (bps) rate cut by the European Central Bank (ECB) in December. Additionally, the likelihood of a more aggressive 50 bps rate reduction has increased to 58%, reflecting heightened market pessimism regarding the region's economic outlook.

• EUR/USD caught a much-needed bullish bounce on Monday.
• Euro-focused economic data remains limited until Friday.
• Key US inflation and growth figures land just in time for the US holiday.

EUR/USD scrambled for higher ground on Monday, clipping back into the 1.0500 handle amid a broad-market relaxing of Greenback bidding as investors step back into a risk-on mood, albeit with limited impact. Overall market flows are set to be crimped this week with the back half of the week’s US market sessions hobbled by the impending US Thanksgiving holiday on Thursday and limited market hours on Friday.

This week sees a firm drought of EU-based datapoints through most of the week, with a fresh round of European Harmonized Index of Consumer Prices (HICP) inflation slated for Friday. Preliminary pan-EU HICP inflation for November is set to swing higher on an annualized basis, a looming threat that European Central Bank (ECB) policymakers have been scrambling to get out in front of. According to ECB officials, a near-term uptick in broad EU inflation metrics shouldn’t be a cause for concern for investors.

The Federal Open Market Committee’s (FOMC) latest Meeting Minutes will be released later in the day on Tuesday, giving traders a glimpse into the Federal Reserve’s (Fed) latest discussions about the direction of interest rates looking forward. Wednesday will follow up with another update to US Personal Consumption Expenditure Price Index (PCEPI) inflation, a key reading of price increases underpinning the US economy. Wednesday also brings a quarterly update of UIS Gross Domestic Product (GDP) growth. Annualized core PCEPI inflation is set to accelerate again in October and forecast to increase to 2.8% from the previous 2.7%. QoQ US GDP growth in the third quarter is expected to hold steady at 2.8%.

EUR/USD price forecast

EUR/USD caught a bid on Greenback softness to retest the 1.0500 handle on Monday. Bids remain unable to break through the key technical metric neatly, and Fiber is set to continue struggling with familiar technical barriers in the near-term. EUR/USD price action has found a little bit of breathing room after hitting a 24-month low late last week, but the climb up is looking very far for Fiber bulls to reclaim anything approaching bullish territory.

EUR/USD daily chart

Hopes that a Treasury Secretary Bessent could curb a more aggressive approach to trade policies in the Trump administration has allowed the Euro (EUR) to outperform on the session so far, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

EUR slightly positive on minor relief rally on Bessent news

“EUR gains tested the 1.05 area despite Germany’s Ifo survey weakening more than expected in November (85.7), reflecting subdued growth prospects amid heightened uncertainties abroad as well as at home following the recent collapse of the German government. New elections are set for February.”

“Spot has recovered from Friday’s drop to the low 1.03s quite well - just not well enough at this point to suggest that the rebound will extend. It’s a close call though. I think further EUR gains through 1.0500/10 today could prompt a deeper, short-term correction in spot to the 1.0600/50 zone. Support is 1.0450 intraday.”

Anyone hoping that the data would allow EUR/USD to move higher was bitterly disappointed on Friday. The first estimates for both the UK and euro area PMIs were much worse than expected, while the US PMIs surprised to the upside. Leading indicators continue to point to completely different worlds on both sides of the Atlantic, and worse, the data seems to be diverging even further. It is therefore not surprising that EUR/USD briefly fell below 1.04 on Friday, Commerzbank’s FX analyst Michael Pfister notes.

Interest rate expectations are one of the last hopes for a EUR/USD turnaround

“It is not just the case that the expected economic policies of a Trump administration will increase the outlook for US growth and inflation in the near future. Rather, Friday's figures showed once again that the US already has a significant growth advantage, with the risk that this will increase. Given the combination of Trump and the already strong figures, the market is now pricing in just over 50 basis points of rate cuts by October 2025.”

“There is now a not so small case for the Fed to pause on rate cuts in December. On the other hand, Jerome Powell made it very clear at the last meeting that they will only analyze the impact of the new Trump administration when plan are put into action. Until then, they will continue as before. And despite the surprisingly strong September jobs report, the underlying trend is still pointing downwards. In addition, the Fed is likely to be more inclined to cut rates again in December to avoid the impression that it is doing so just to help one side in the election campaign.”

“In addition to US interest rate expectations, expectations for the euro area are also encouraging. The market is now more inclined to expect a big move in December, i.e. a 50bp cut has become more likely in recent weeks. Here, too, our economists see a 25 basis point move as more likely. This is especially true in view of Friday's inflation figures for November, which are expected to show a further increase. In short, interest rate expectations are currently one of the last hopes for an imminent turnaround in EUR/USD.”

The Euro (EUR) fell to 2-year low last Fri after PMIs slumped in Germany and France. Pair was last at 1.0472 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Upside surprise may aid the squeeze in EUR shorts

“Elsewhere, worsening of geopolitical development between Ukraine-Russia (higher natural gas prices), fears of US protectionism measures, German political uncertainty, an acceleration in dovish re-pricing of ECB cut cycle further undermined EUR. Last Fri, Villeroy said that decision made at ECB are independent of those of the Fed.”

“And he elaborated saying that ECB can lower rates with the fall in inflation. He also added that prices are increasing less quickly than wages on average – allowing ECB to lower interest rates. This morning, EUR rose amid pullback in USD. Bearish momentum on daily chart intact while RSI shows signs of turning higher from near oversold conditions.”

“Bullish divergence is also observed on daily MACD. Not ruling our EUR short squeeze intra-day. Resistance at 1.0510, 1.06 and 1.07 (21 DMA). Key support at 1.0450 levels before 1.03 levels. Focus this week on Euro-area CPI. Upside surprise may aid the squeeze in EUR shorts.”

• EUR/USD faces pressure after rebounding to near 1.0500 as the US Dollar bounces back.
• The US Dollar rebounds as investors digest Trump’s pick of Scott Bessent as Treasury Secretary.
• ECB Lane warned that US tariffs could lead to a big disruption in the Eurozone.

EUR/USD faces selling pressure near the psychological resistance of 1.0500 in Monday’s European session after a solid opening that lost some steam as the US Dollar (USD) attempts to rebound. The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, broadly consolidates at around 107.00 as investors digest the selection of fund manager Scott Bessent for the role of Treasury Secretary by President-elect Donald Trump.

The Greenback fell sharply early in the Asian session, as did 10-year US Treasury yields, in a warm welcome by bond markets given Bessent’s old relation with Wall Street. Still, this initial reaction appears to be short-lived as the US Dollar swings between mild gains and losses.

In an interview with the Wall Street Journal (WSJ) after his nomination for Treasury Secretary over the weekend, Bessent said that he will focus on enacting tariffs, eliminating tax cuts on social security benefits and overtime wages, and maintaining the US Dollar’s status as the world's reserve currency.

Meanwhile, the improved economic outlook in the United States (US) is expected to support the resumption of the US Dollar’s uptrend. According to PMI data released on Friday, overall business activity in the US expanded in November at the fastest pace in 31 months. The data signaled robust growth in the service sector activity and a minor contraction in the manufacturing sector’s output.

This week, investors will focus on the Personal Consumption Expenditure Price Index (PCE) data for October, which will be published on Wednesday. The inflation data will influence market speculation for the Federal Reserve’s (Fed) likely interest rate action in the December meeting. According to the CME FedWatch tool, there is a 56% chance that the Fed will cut interest rates by 25 basis points (bps) to 4.25%-4.50%, while the rest favors leaving rates unchanged.

Daily digest market movers: EUR/USD stays under pressure as ECB officials worry about Eurozone growth

• EUR/USD is expected to remain on the back foot as investors expect Scott Bessent’s selection for the role of Treasury Secretary has set the stage for tariff hikes, a move that would prompt a global trade war. Higher import tariffs by the US will adversely impact the already vulnerable Eurozone economy by dampening its export sector.
• Speaking to Les Echos on Monday, European Central Bank (ECB) Chief Economist Philip Lane said that the risk of a big disruption to the Eurozone is very high if the US government enacts a rapid and universal tariff regime, according to Mace News. Last week, Lane warned that a global trade war due to the likely implementation of President-elect Donald Trump’s higher tariffs would result in a “sizeable” loss in global economic output. "Trade fragmentation entails sizeable output losses,” Lane added.
• When asked about his outlook on interest rates, Lane said: “A lot of the final leg of bringing inflation to target could be covered next year; after that restrictive policy will not be needed.”
• The German IFO Business Sentiment index data came in mixed in November. The data showed that German businesses’ morale deteriorated slightly over the month, although the index gauging expectations came in slightly better than what economists had expected.
• Friday’s Flash HCOB Composite PMI data for November showed that the European Union (EU) is going through a rough phase. The Composite PMI unexpectedly declined as the service sector output came in below the 50.0 threshold, a figure that separates expansion from contraction. The manufacturing sector activity contracted further. The report showed that New Orders decreased for the sixth straight month running. a, “The environment in November is stagflationary,” analysts at S&P Global said.

Technical Analysis: EUR/USD finds interim support near 1.0330

EUR/USD struggles to hold its recovery to near 1.0500 seen on Monday’s opening as the broader outlook for the pair remains bearish. All short-to-long-term day Exponential Moving Averages (EMAs) are declining, pointing to a downside trend.

The 14-day Relative Strength Index (RSI) rebounded after reaching oversold territory. However, the momentum oscillator has cooled down, which could allow bears to take the charge again.

Looking down, the November 22 low of 1.0330 will be a key support for Euro bulls. On the flip side, the November 20 high round 1.0600 emerges as the first resistance.

The Euro (EUR) could edge higher to 1.0520; the strong resistance at 1.0560 is unlikely to come under threat. In the longer run, EUR must break and remain below the 1.0333 low before further decline can be expected, UOB Group’s FX analyst Quek Ser Leang and Lee Sue Ann notes.

EUR to decline further below the 1.0333 low

24-HOUR VIEW: “Following last Thursday’s sharp drop, we pointed out on Friday that EUR ‘could break the significant support at 1.0450.’ However, we were of the view that ‘the next technical target at 1.0400 is likely out of reach for the time being.’ While our view of a lower EUR was not wrong, we did not anticipate it to plummet to 1.0333. EUR rebounded quickly and closed at 1.0417 but opened higher in early Asian trade today. There has been a slight increase in momentum, and it could edge higher to 1.0520 today. The strong resistance at 1.0560 is unlikely to come under threat. Support is at 1.0450, followed by 1.0420.”

1-3 WEEKS VIEW: “We revised our EUR view to negative last Friday (22 Nov, spot at 1.0475), indicating that ‘EUR weakness has resumed, and the levels to monitor are 1.0450 and 1.0400.’ We also indicated that we would maintain our view provided that 1.0560 (‘strong resistance’ level) is not breached. EUR subsequently broke below 1.0450 and 1.0400, reaching a low of 1.0333. However, the decline was brief, as it rebounded to close at 1.0417 (-0.53%). While the weakness in EUR remains intact, it must now break and remain below the 1.0333 low before further decline can be expected. The likelihood of EUR breaking below 1.0333 is not high, but it will remain intact as long as 1.0560 (no change in ‘strong resistance’) is not breached in the next few days.”

• EUR/USD recovers some lost ground to around 1.0475 in Monday’s early European session. 
• The negative outlook of the pair remains intact below the key 100-period EMA with a bearish RSI indicator. 
• The initial support level is located at the 1.0400-1.0390 region; the first resistance level is seen at 1.0545. 

The EUR/USD pair trades in positive territory near 1.0475 during the early European session on Monday. The uptick of the major pair is supported by the decline in the US Dollar (USD) as Donald Trump announced that he will nominate Scott Bessent to be the secretary of the US Department of the Treasury.

However, EUR/USD keeps the bearish vibe on the 4-hour chart as the price remains capped under the key 100-period Exponential Moving Averages (EMA). The downward momentum is reinforced by the Relative Strength Index (RSI), which stands below the midline near 44.25, supporting the sellers in the near term. 

The initial support level for the major pair emerges in the 1.0400-1.0390 zone, representing the psychological level and the lower limit of the Bollinger Band. A breach of this level could pave the way to 1.0331, the low of November 22. The next downside target to watch is 1.0290, the low of November 30, 2022. 

On the bright side, the first upside barrier is seen at 1.0545, the high of November 21. The next hurdle is located near the upper boundary of the Bollinger Band at 1.0591. The crucial resistance level emerges at 1.0621, the 100-period EMA. 

EUR/USD 4-hour chart

• EUR/USD rebounds from a two-year low of 1.0332 as the US Dollar retreats after hitting two-year highs on Friday.
• US Dollar may appreciate as recent US PMI data strengthen odds of the Fed slowing the pace of rate cuts.
• The Euro faced challenges as recent HCOB PMI data highlighted continued weakness in Eurozone business activity.

EUR/USD recovers from its two-year low of 1.0332, recorded on Friday, trading near 1.0480 during Monday's Asian session. This rebound can be linked to a correction in the US Dollar (USD), despite robust preliminary S&P Global US Purchasing Managers’ Index (PMI) data released in the prior session.

Meanwhile, the US Dollar Index (DXY), which tracks the US Dollar's performance against six major currencies, has eased to around 107.00 after hitting a two-year high of 108.07 on Friday. However, downside risks for the USD remain limited, as recent economic data has strengthened expectations that the Federal Reserve (Fed) may slow the pace of rate cuts.

The S&P Global US Composite PMI climbed to 55.3 in November, indicating the strongest growth in private sector activity since April 2022. The US Services PMI surged to 57.0, up from 55.0 in October and significantly exceeding market expectations of 55.2, marking the sharpest expansion in the services sector since March 2022. Meanwhile, the US Manufacturing PMI edged higher to 48.8 from 48.5 in October, aligning with market forecasts.

The Euro came under pressure after PMI data highlighted continued weakness in Eurozone business activity. The HCOB Flash Eurozone Composite PMI fell sharply to 48.1 in November, down from 50.0 in October and well below expectations of 50.0. This decline reflects a contraction in the services sector for the first time in ten months, coupled with a persistent downturn in manufacturing.

On Thursday, European Central Bank (ECB) Chief Economist Philip Lane cautioned that a potential global trade war, driven by the expected implementation of President-elect Donald Trump’s higher tariffs, could lead to significant global economic losses. "Trade fragmentation entails sizeable output losses," Lane emphasized.

Following the weaker-than-expected Eurozone PMI data, the likelihood of an aggressive rate cut by the ECB has surged. Market expectations for a 50-basis-point (bps) reduction in the Deposit Facility Rate, bringing it down to 2.5%, have risen to over 50%, compared to less than 20% before the PMI data release.

The Euro (EUR) plunged in response to poor macro data reports earlier. German and French PMI data for November nearly all disappointed expectations; only German Manufacturing bettered consensus estimates but the data here remained quite weak (43.2, from October’s 43.0).

EUR slumps to near two-year low

“Preliminary Eurozone data looked very poor as a result, with Services and the Composite reading dropping sharply on the month and falling back under 50 (to 49.2 and 48.1 respectively). Manufacturing also dropped to 45.2. Weakening growth momentum boosted expectations that the ECB will cut rates more aggressively next month.”

“Dec swaps added around 10bps of expected easing from yesterday and are pricing in 38bps of cuts following the data. The EUR is consolidating significant, intraday losses above the early European low around 1.0335 but the broader undertone in spot remains very soft.”

“EUR losses from the early week consolidation high near 1.06 do not look complete and a weekly close under the 2023 low (1.0447) would edge risks squarely towards more significant, medium-term losses for the EUR in the medium term. Minor EUR rebounds to the mid/upper 1.04s are likely to attract strong selling interest for now.

• EUR/USD falls sharply as the US Dollar extends its rally and the Eurozone Composite PMI surprisingly contracts.
• Eurozone Service PMI surprisingly decreased to 49.2, suggesting that business activity contracted in November for the first time since January.
• The US Dollar strengthens as traders doubt over Fed rate cuts in December.

EUR/USD sinks to near two-year lows below 1.0400 in European trading hours on Friday after the release of the preliminary HCOB Eurozone Purchasing Managers Index (PMI) report for November, which showed that the overall business activity surprisingly contracted. The Eurozone Composite PMI declined to 48.1 while economists expected the economic data to manage to remain near the borderline at 50.0. A figure below the 50.0 threshold is considered a contraction in economic activities

A major decline in the overall private business activity came from weakness in the Services PMI, which also contracted unexpectedly. The Services PMI, which gauges activity in the service sector, declined to 49.2 against estimates of 51.8 and the prior release of 51.6. The service sector output contracted for the first time since January.

The Manufacturing PMI continued to contract at a faster-than-expected pace. The index declined sharply to 45.2 against the estimates and the prior release of 46.0

A majority of European Central Bank (ECB) officials are already worried about weak growth and potential economic risks due to expectations of a trade war with the United States (US). On Thursday, ECB chief economist Philip Lane warned that a global trade war due to the likely implementation of President-elect Donald Trump’s higher tariffs would result in a “sizeable” loss in global economic output. "Trade fragmentation entails sizeable output losses,” Lane said.

Meanwhile, Governor of the Central Bank of Cyprus Christodoulos Patsalides said, "If trade restrictions materialize, the outcome may be inflationary, recessionary or worse, stagflationary," Reuters reported.

Daily digest market movers: EUR/USD weakens amid US Dollar’s strength

• EUR/USD faces an intense sell-off as the US Dollar (USD) extends bullish momentum near a two-year high, with the US Dollar Index (DXY) trading above 107.50.
• The outlook of the US Dollar is upbeat on expectations that there will be fewer interest rate cuts from the Federal Reserve (Fed) in its current policy-easing cycle than what market participants had anticipated earlier.
• Market participants expect that United States (US) inflation and economic growth will accelerate when President-elect Donald Trump takes office as his economic agenda includes lower taxes and raising import tariffs by 10% universally, except the Eurozone and China, which are expected to face even higher duties.
• Higher import tariffs and lower taxes will boost business investment, as well as the demand for labor and domestically produced goods and services. A scenario that will be inflationary and force the Fed to remain cautious on interest rate cuts.
• The impact of the hot inflation outlook is visible in market speculation for the Fed interest rate policy for the December meeting. Fed’s probability of reducing interest rates by 25 basis points (bps) to the 4.25%-4.50% range has eased to 56% from 70% a month ago, according to the CME FedWatch tool.
• Going forward, investors will focus on the flash US S&P Global PMI data for November, which will be published at 14:45 GMT. The PMI report is expected to show that the overall business activity expanded at a faster pace due to an improvement in the output of manufacturing as well as the service sector.

Technical Analysis: EUR/USD under pressure below 1.0450

EUR/USD extends downside and reaches a fresh two-year low below 1.0400 on Friday after sliding below the psychological support of 1.0500 the prior day. The pair could witness more downside 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, EUR/USD bottomed at 1.0332 on Friday. Should that level fail to hold, the pair could find a cushion near the round-level support of 1.0300. On the flip side, the psychological level of 1.0500 and the November 20 high round 1.0600 will be the key barriers for the Euro bulls.

(This story was corrected on November 22 at 09:55 GMT to add "falls sharply" at the first bullet point.)