CFD Trading Rate Euro vs US Dollar (EURUSD)

• EUR/USD continues to lose ground as the US Dollar appreciates due to the increasing likelihood of slower Fed rate cuts.
• The Euro weakens as the ECB is anticipated to reduce Deposit Facility Rate by 25 basis points in December.
• The US Dollar Index hovers near its recent yearly high of 107.15, which was recorded on Thursday.

EUR/USD remains on a downward trend for the third consecutive session, hovering around 1.0470 during the Asian trading hours on Friday. The pair dropped to a low of 1.0462 on Thursday, a level not seen since October 2023. This decline is driven by the Euro's weakness, fueled by expectations that the European Central Bank (ECB) may speed up its policy easing.

The ECB is broadly expected to reduce its Deposit Facility Rate by 25 basis points (bps) to 3% during its December meeting. Market participants also anticipate that the ECB will move toward a neutral policy stance more rapidly in 2025, amid growing concerns about the Eurozone’s economic outlook.

Traders are awaiting the release of the Eurozone HCOB Purchasing Managers Index (PMI) data for November on Friday. The Pan-EU Manufacturing PMI is expected to remain flat at a contractionary 46.0, while the Services PMI is projected to rise slightly to 51.8 from 51.6.

Attention will then shift to the US S&P Global PMI data, set to be released later in the North American session. The US Manufacturing PMI for November is forecast to increase to 48.8 from 48.5, while the Services PMI is expected to rise to 55.3 from 55.0.

The US Dollar Index (DXY), which measures the USD against a basket of major currencies, trades near 107.00, just below its recent yearly high of 107.15 reached on Thursday. The US Dollar gained strength following the release of last week's Initial Jobless Claims data.

US Jobless Claims dropped to 213,000 for the week ending November 15, down from a revised 219,000 (previously 217,000) in the prior week and below the forecast of 220,000. This development has sparked speculation that the pace of Federal Reserve rate cuts could slow.

• EUR/USD gave up another 0.6% as Greenback remains bid.
• The Euro is poised for further losses after falling to its lowest prices in over a year.
• Friday PMI releases to dominate the end of the week.

EUR/USD trimmed further into the low end on Thursday, continuing to shed weight in the near-term and falling to the lowest bids since November of 2023. All but one of the last eight trading weeks are in the red, and Fiber is set to continue declining unless the Euro finds a reason to materially appreciate.

Europe’s HCOB Purchasing Managers Index (PMI) numbers for November are due early in the European market window. Pan-EU Manufacturing PMI figures are expected to hold flat at a contractionary 46.0, with the European Services PMI component expected to tick up to 51.8 from 51.6.

Median market forecasts for the US side of Friday’s PMI release schedule call for a general upswing in activity expectations, with November’s US Manufacturing PMI expected to rise to 48.8 from 48.5. The Services PMI component is likewise forecast to increase to 55.3 from 55.0.

EUR/USD price forecast

The EUR/USD pair remains under sustained bearish pressure, trading near 1.0470 as sellers dominate. The price continues to trend below both the 50-day EMA at 1.0890 and the 200-day EMA at 1.0866, reinforcing the bearish outlook after a death cross formed in recent weeks. The downtrend has been unbroken since late October, with the pair hitting fresh multi-month lows. Immediate support lies at 1.0450, a psychological level that could attract buyers; a break below this area might expose 1.0400 as the next target.

The MACD indicator remains firmly bearish, with the MACD line staying below the signal line and the histogram deep in negative territory. Although the histogram shows subtle signs of easing, the overall momentum suggests limited prospects for a bullish reversal in the near term. Bulls need to reclaim the 50-day EMA to initiate a meaningful recovery, while bears will aim for further losses if the pair fails to hold above the 1.0450 threshold. Traders should watch for any significant price action around this support zone for clues about the pair's next move.

EUR/USD daily chart

The Euro (EUR) is trading softly on the session, Scotiabank’s Chief FX Strategist Shaun Osborne notes.  

EUR is trading weak on the day

“Dovish comments from ECB Governor Villeroy earlier appear to be driving spot. He remarked that victory against inflation was in sight, economic risks were tilting to the downside and that the ECB should continue to ease restrictive policy. He also suggested a new round of tariffs might not have as big impact on Eurozone inflation.”

“Note that several other ECB speakers are tap today, including Chief Economist Lane (10.30ET).

Bearish price signals around the early week highs near 1.06 leave the EUR looking prone to further softness in the short– and medium term.”

“Short-term price patterns suggest a minor double top developed around the 1.0605 peaks earlier this week and a clearer break under the low between those tops (1.0524) implies a downside move to 1.0440—effectively a test of key support at 1.0450— in the next few days.”

• EUR/USD sees more downside below 1.0500 as ECB policymakers are concerned about growing risks to Eurozone economic growth.
• ECB’s Villeroy supports more rate cuts as the balance of risks to inflation and growth is shifting to the downside.
• Investors will pay close attention to the flash Eurozone/US PMI data for November on Friday.

EUR/USD remains vulnerable above the psychological support of 1.0500 in European trading hours on Thursday. The major currency pair faces selling pressure due to the Euro’s weak performance on expectations that the European Central Bank (ECB) could accelerate its policy-easing cycle.

The ECB is widely anticipated to cut its Deposit Facility Rate again by 25 basis points (bps) to 3% in the December meeting and is expected to head towards the neutral range faster in 2025 as market participants worry about the Eurozone’s economic outlook.

Investors expect the European Union (EU) to go through a rough time when US President-elect Donald Trump takes office and implements his economic agenda, which would lead to a potential global trade war, especially with the Eurozone and China. In his election campaign, Trump mentioned that the euro bloc will "pay a big price" for not buying enough American exports. 

ECB officials are also worried about growing risks to Eurozone economic growth and want the central bank to continue reducing the degree of monetary policy tightness through interest rate cuts. ECB policymaker and the Governor of the Bank of France François Villeroy de Galhau said on Wednesday in a speech in Tokyo, “The balance of risks on growth and inflation is shifting to the downside.” Villeroy added that the pace of future ECB rate cuts should be guided by "agile pragmatism". However, he ruled out the significant impact of US tariffs on the Eurozone’s inflation outlook.

To know about the current status of economic health and forward demand, investors will focus on the flash HCOB Purchasing Managers Index (PMI) data for November for the Eurozone and its major nations, which will be released on Friday. Flash readings are expected to show that the overall private business activity remains at the expansionary borderline.

Daily digest market movers: EUR/USD weakens as US Dollar eyes more gains

• EUR/USD edges down as the US Dollar (USD) holds its Wednesday’s recovery and strives to refresh yearly highs. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, gathers strength to break above the immediate high of 107.00. The Greenback had been performing stronger on Donald Trump’s victory in both houses as he will be able to implement his trade and tax policies smoothly.
• The consequences of Trump’s policies will be inflationary for the United States (US) economy, restricting the Federal Reserve (Fed) from cutting interest rates deeply. The impact can be seen in market speculation for Fed interest rate cuts in December, which has been diminished significantly. Fed’s probability for lowering borrowing rates next month has eased to 56% from 73% a week ago, according to the CME FedWatch tool.
• Market experts have also upwardly revised the Federal Funds Rate target for 2025. Bank of America (BofA) has upped its terminal fed funds rate forecast to 3.75%-4.00% from 3.00%-3.25%.
• Going forward, the US Dollar will be guided by the preliminary S&P Global PMI data for November, which will be published on Friday. Economists expect the overall private sector activity to have improved. 

Technical Analysis: EUR/USD struggles above 1.0500

EUR/USD strives to hold the key support of 1.0500. 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.

The Euro (EUR) is likely to trade in a range between 1.0505 and 1.0575. In the longer run, recent downtrend in EUR is likely to resume if it breaks and stays below 1.0490, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

EUR is likely to trade in a range between 1.0505 and 1.0575

24-HOUR VIEW: “EUR dropped sharply but briefly, to 1.0523 on Tuesday. Yesterday (Wednesday), we noted that ‘The brief decline did not result in any increase in momentum.’ We expected EUR to ‘trade in a range, likely between 1.0550 and 1.0620.’ Our view turned out to be incorrect, as EUR plummeted to 1.0507, rebounding to close at 1.0543 (-0.49%). The sharp drop appears to be overdone, and EUR is unlikely to weaken much further. Today, it is more likely to trade in a range between 1.0505 and 1.0575.”

1-3 WEEKS VIEW: “After holding a negative EUR view for two weeks, we revised the outlook to neutral yesterday (20 Nov, spot at 1.0590), indicating that ‘the weakness in EUR has stabilised.’ We held the view that EUR ‘is expected to consolidate between 1.0520 and 1.0685.’ Although EUR subsequently dropped below the bottom of our expected range (low of 1.0507), there has been no significant increase in momentum. The recent downtrend in EUR is likely to resume if it breaks and stays below 1.0490. The likelihood of EUR breaking clearly below 1.0490 will remain intact as long as 1.0600 is not breached.”

• EUR/USD may depreciate due to safe-haven flows amid the escalated Russia-Ukraine conflict.
• ECB member Yannis Stournaras remarked that the Eurozone is nearing a sustainable attainment of its 2% inflation target.
• The US Dollar appreciated due to cautious remarks from Fed officials.

EUR/USD appreciates slightly after registering losses in the previous session, trading around 1.0550 during the Asian hours on Thursday. However, the upside of the pair could be restrained due to safe-haven flows amid rising geopolitical conflict between Russia and Ukraine.

Reuters reported that Ukraine launched a volley of British Storm Shadow cruise missiles into Russia on Wednesday, marking the latest deployment of Western weaponry against Russian targets. Moscow has stated that the use of Western weapons to strike Russian territory far from the border would significantly escalate the conflict.

European Central Bank (ECB) Governing Council member Yannis Stournaras stated on Wednesday that the Eurozone is close to sustainably achieving its 2% inflation target. Stournaras emphasized the responsibility of policymakers to ensure they do not fall short of this goal, according to Bloomberg.

Meanwhile, the EU Financial Stability Review noted that escalating geopolitical tensions and policy uncertainties are intensifying sovereign vulnerabilities while growing global trade disputes heighten the risk of economic shocks. 

Since June, the ECB has implemented three rate cuts as inflation edges closer to the 2% target. However, growth forecasts have been revised downward twice. Markets widely expect a 25-basis-point rate cut next month, with a smaller probability of a more substantial reduction.

The US Dollar (USD) gained support from cautious remarks by Federal Reserve (Fed) officials. Boston Fed President Susan Collins stated on Wednesday that while more interest rate cuts are necessary, policymakers should proceed cautiously to avoid moving too quickly or too slowly, according to Bloomberg.

Meanwhile, Fed Governor Michelle Bowman highlighted that inflation remains elevated over the past few months and stressed the need for the Fed to proceed cautiously with rate cuts.

• 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