CFD Trading Rate Euro vs US Dollar (EURUSD)

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

EUR consolidates above key support

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Technical Analysis: EUR/USD hovers around 1.0500

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

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

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

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

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

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

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

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

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

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

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

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

EUR finds support near 1.05

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

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

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

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

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

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

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

Daily digest market movers: EUR/USD enjoying a breather

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

Technical Analysis: EUR/USD in search of some support

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

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

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

EUR/USD: Daily Chart

The Euro (EUR) fell below 1.05 overnight but the dip was brief. Last seen at 1.0568 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

EUR to continue suffering from the US election outcome

“Daily momentum is bearish though RSI shows tentative signs of turning from near oversold conditions. Near term consolidation not ruled out but bias to sell rallies. Resistance at 1.06, 1.0740 (76.4% fibo fibo retracement of 2024 low to high), 1.0780 (21 DMA). Support at 1.05, 1.0450/1.05 levels.”

“Overall, EUR should continue to bear the brunt of the US election outcome. Trump presidency will result in shifts in US foreign, trade policies. The potential 20% tariff (if implemented) can hurt Europe where growth is already slowing, and that US is EU’s top export destination.”

“On German politics, the minority government faces economic and diplomatic challenges. PM Scholz is seeking confidence vote earlier on 16 Dec instead of 15 Jan – but is expected to lose. Snap elections likely planned for 23 Feb. Elsewhere wide EU-UST yield differentials continued to widen, validating EUR’s “fair value” relative to yield differentials.”

Momentum has slowed somewhat; any further decline is likely part of a lower trading range of 1.0490/1.0580. In the longer run, price action continues to suggest EUR weakness; the next support level is at last year’s low, near 1.0450, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Next support level is at last year’s low at 1.0450

24-HOUR VIEW: “Following the drop in EUR to a low of 1.0555 two days ago, we highlighted yesterday that ‘Despite being deeply oversold, the weakness still has not stabilised.’ We held the view that EUR ‘could dip below 1.0555 but the next major support at 1.0500 is unlikely to come under threat.’ However, EUR broke below 1.0500, reached a low of 1.0496 and then rebounded to close at 1.0530. Conditions remain oversold, but the weakness still has not quite stabilised just yet. That said, as momentum has slowed somewhat, any further decline is likely part of a lower trading range of 1.0490/1.0580. In other words, EUR is unlikely to break clearly below 1.0490.”

1-3 WEEKS VIEW: “We have maintained a negative EUR view for more than a week now. Yesterday (14 Nov, spot at 1.0565), we indicated that EUR ‘is still expected to weaken.’ However, we indicated that given the oversold conditions, ‘the 1.0500 level may not come into view so soon.’ We also indicated that ‘only a breach of 1.0670 (‘strong resistance’ level) would mean that EUR is not weakening further.’ We underestimated the EUR weakness as it fell below 1.0500 (low has been 1.0496). The price action continues to suggest EUR weakness, even though caution is warranted given the deeply oversold conditions. The next support is at last year’s low, near 1.0450. On the upside, the ‘strong resistance’ level has moved lower to 1.0610 from 1.0670.”

• EUR/USD gains ground as the US Dollar Index pulls back from a yearly high of 107.06.
• Fed’s Powell stated that US economic performance has been "remarkably good," allowing lowering rates gradually.
• The ECB’s October Monetary Policy Meeting Accounts indicated increasing consideration of rate cuts with caution about domestic inflationary pressures.

EUR/USD breaks its five-day losing streak, trading around 1.0540 during the Asian session on Friday. This rebound is likely due to a downward correction in the US Dollar (USD) following comments from Fed Chair Jerome Powell. Powell stated that the recent performance of the US economy has been "remarkably good," allowing the Federal Reserve the flexibility to gradually lower interest rates.

Additionally, the US Producer Price Index (PPI) rose by 2.4% year-over-year in October, up from a revised 1.9% increase in September (previously 1.8%) and surpassing market expectations of 2.3%. Meanwhile, the Core PPI, which excludes food and energy, increased by 3.1% YoY, slightly above the forecasted 3.0%.

The US Dollar Index (DXY), which tracks the US Dollar's performance against six major currencies, has pulled back from its yearly high of 107.06 recorded on Thursday. This decline is attributed to a slowdown in "Trump trades." At the time of writing, the DXY trades near 106.80.

European Central Bank (ECB) board member Isabel Schnabel stated on Thursday that interest rate changes should remain the ECB's primary policy tool, while bond purchases and forward guidance should be used more sparingly.

The ECB’s October Monetary Policy Meeting Accounts indicated increasing consideration of rate cuts. However, ECB officials remain cautious about domestic inflationary pressures, citing strong wage growth and sluggish labor productivity. The ECB emphasized the need to gather more data before implementing any policy changes.

• EUR/USD continues to decline as the Euro deflates.
• Fiber found a 57-week low as the Greenback continues to climb.
• US Retail Sales in the barrel for Friday will wrap up the economic calendar.

EUR/USD briefly tested fresh year-long lows on Thursday, piercing the 1.0500 handle for the first time in 54 weeks. A lack of meaningful EU data is doing very little to provide support for the Euro, and Fiber bids continue to tilt in favor of the safe haven US Dollar. European Gross Domestic Product (GDP) growth figures failed to spark a bid under the Euro, printing exactly at-expectations. Quarterly pan-EU GDP came in at 0.4% QoQ exactly as markets expected, with annualized GDP also matching forecasts at 0.9% YoY.

Producer Price Index (PPI) producer-level inflation figures came in roughly as expected, despite a slight upswing in annualized core PPI numbers. Headline PPI matched forecasts in October, rising 0.2% MoM compared to the previous month’s revised 0.1%. Core PPI for the year ended in October accelerated more than expected, ticking up to 3.1% compared to the expected 3.0% rising above the previous period’s 2.9%, which was also revised slightly higher from 2.8%.

The economic calendar is once again one-sided on Friday, with US Retail Sales in the barrel to wrap up the trading week. The last blast of US economic data this week will be Retail Sales for October, which are expected to ease to 0.3% from the previous month’s 0.4%.

EUR/USD price forecast

The EUR/USD daily chart is displaying sustained bearish momentum, with the pair sharply falling below the 50-day and 200-day Exponential Moving Averages (EMAs), which are positioned around 1.0867 and 1.0884, respectively. The recent "death cross," where the 50-day EMA crossed below the 200-day EMA, reinforces the downside pressure and suggests a continuation of the prevailing downtrend. EUR/USD is now trading near multi-month lows around the 1.0520 level, which could act as a psychological support in the short term. However, any recovery is likely to face strong resistance around the 1.0700 level, where the EMAs converge.

The MACD indicator further supports the bearish outlook, as the MACD line remains below the signal line in negative territory, with expanding histogram bars below the zero line. This configuration indicates a robust downward trend, with selling momentum persisting. Unless the pair manages to stage a clear breakout above the EMAs, the bias remains firmly to the downside. A break below the 1.0500 level could open the door for a deeper decline, with 1.0400 emerging as the next potential support area. Bulls would need a decisive recovery above the 1.0880 mark to negate the bearish bias.

EUR/USD daily chart

The Euro (EUR) extended its move lower amid broad USD strength while political uncertainties in Germany is not helping. EUR was last seen at 1.0521 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Risks remain skewed to the downside

“Elsewhere EU-UST yield differentials continued to widen, validating EUR’s ‘fair value’ relative to yield differentials. Daily momentum is bearish while RSI fell. Risks remain skewed to the downside. Next support at 1.0450/1.05 levels. Resistance at 1.06, 1.0740 (76.4% fibo fibo retracement of 2024 low to high), 1.0780 (21 DMA).”

“On German politics, the minority government faces economic and diplomatic challenges. PM Scholz is seeking confidence vote earlier on 16 Dec instead of 15 Jan – but is expected to lose. Snap elections likely planned for 23 Feb.”

“Overall, EUR should continue to bear the brunt of the US election outcome. Trump presidency will result in shifts in US foreign, trade policies. The potential 20% tariff (if implemented) can hurt Europe where growth is already slowing, and that US is EU’s top export destination.”

The Euro (EUR) could drop below the 1.0555 low; deeply oversold conditions suggest 1.0500 is unlikely to come under threat. In the longer run, EUR is still expected to weaken; the 1.0500 level may not come into view so soon, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

The 1.0500 level may not come into view so soon

24-HOUR VIEW: “Two days ago, we expected EUR to weaken, but we were of the view that ‘the major support at 1.0600 could be out of reach.’ After EUR dropped to a low of 1.0594, we indicated yesterday that ‘barring a break above 1.0660, EUR could decline further to 1.0585 before stabilisation can be expected.’ We added, ‘This time around, the next major support at 1.0555 is likely out of reach.’ During NY session, EUR popped briefly to 1.0653, and then plummeted to 1.0555. EUR closed on a weak note at 1.0563 (-0.56%). Despite being deeply oversold, the weakness still has not stabilised. That said, the potential for any further decline could be relatively limited. From here, EUR could dip below 1.0555 but the next major support at 1.0500 is unlikely to come under threat. On the upside, a breach of 1.0610 (minor resistance is at 1.0590) would suggest the weakness in EUR has stabilised.”

1-3 WEEKS VIEW: “We have maintained a negative EUR view since late last week. As we tracked the decline, we highlighted yesterday (13 Nov, spot at 1.0620) that ‘downward remains strong, and the focus is at 1.0555.’ We pointed out that ‘The next technical objective below 1.0555 is at 1.0500.’ EUR fell and reached 1.0555 in NY trade. While we continue to expect a weaker EUR, note that after declining sharply for a few days, conditions are deeply oversold, and 1.0500 may not come into view so soon. Overall, only a breach of 1.0670 (‘strong resistance’ level was at 1.0705 yesterday) would mean that EUR is not weakening further.”

• EUR/USD sinks to near 1.0530 as the US Dollar extends its rally as Republicans win both houses in the US.
• The US inflation accelerated expectedly in October, which boosted expectations of an interest rate cut in December.
• Investors await Fed Jerome Powell’s speech on Thursday for fresh interest rate guidance.

EUR/USD posts a fresh annual low near 1.0530 in European trading hours and extends its losing streak for the fifth trading day on Thursday. The major currency pair has faced an intense sell-off as the US Dollar (USD) continues to enjoy upside momentum, being one of the major beneficiaries of President-elected Donald Trump’s win in the United States (US) presidential election. The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, climbs to near 106.80, the highest level seen since November 1, 2023.

It will be easy for Trump to implement the agenda of lower taxes on businesses and workers, as well as high import tariffs, as Republicans have ensured control of the Senate and the House of Representatives, according to the Associated Press. 

An increase in import tariffs would increase the demand for domestically produced goods and services, which would boost inflationary pressures that limit the potential of the Federal Reserve (Fed) to cut interest rates faster and deeper.

The Greenback rose sharply on Wednesday after the release of the US Consumer Price Index (CPI) data for October. The inflation report showed that price pressures grew expectedly on a monthly as well as annual basis, boosting expectations of interest rate cuts in the December meeting. According to the CME FedWatch tool, the probability of the Fed cutting interest rates by 25 basis points (bps) to 4.25%-4.50% next month increased to 83% from 59% a day before.

In Thursday’s session, investors will pay close attention to Fed Chair Jerome Powell’s commentary in a panel discussion hosted by the Federal Reserve Bank of Dallas at 20:00 GMT. Market participants would like to know his stance on December’s monetary policy decision and the impact of Trump's policies in the medium and longer term.

On the economic front, investors will focus on the US Initial Jobless Claims for the week ending November 8 and the Producer Price Index (PPI) data for October, which will be published at 13:30 GMT.

Daily digest market movers: EUR/USD faces pressure on firm ECB dovish bets

• EUR/USD remains on the backfoot amid Euro’s (EUR) more than a week-long underperformance against its major peers. The Euro faces pressure from Trump’s victory in the US presidential election and the collapse of the three-party coalition government in Germany after Chancellor Olaf Scholz sacked Finance Minister Christian Linder on November 6.
• The implementation of Trump’s tariffs on the Eurozone is expected to dent its export sector significantly, which could weaken its overall Gross Domestic Product (GDP) growth and result in further depreciation in the Euro.
• Big banks, including JPMorgan and Deutsche Bank, reckon a drop to parity could happen, depending on the extent of tariffs. Tax cuts could also fuel US inflation and limit Federal Reserve interest rate cuts, making the Dollar potentially more attractive than the Euro, Reuters reported.
• Meanwhile, expectations for the European inflation remaining under control have prompted expectations of more interest rate cuts by the European Central Bank (ECB). ECB Governing Council Member and Bank of Finland Governor Olli Rehn commented on Tuesday that the Deposit Rate could decline the so-called neutral rate in the first half of 2025. According to the ECB staff, the neutral rate is around 2% or 2.25%.

Technical Analysis: EUR/USD sees support near 1.0500

EUR/USD slides to its lowest since November 1, 2023, near 1.0530. The major currency pair weakened after breaking below the April 16 low of 1.0600. The outlook of the shared currency pair has become bearish as all short to long-term Exponential Moving Averages (EMAs) are declining. 

The 14-day Relative Strength Index (RSI) drops to nearly 30.00, adding to evidence of more weakness in the near term.

Looking down, the pair is expected to find a cushion near the psychological support of 1.0500. On the flip side, the round-level resistance of 1.0700 will be the key barrier for the Euro bulls.

• EUR/USD falls to 1.0546 on Thursday, the lowest since November 2023.
• Eurozone Gross Domestic Product is anticipated to report 0.4% QoQ in the third quarter.
• Traders will likely observe US October Producer Price Index data later in the North American session.

EUR/USD extends its decline for the fifth consecutive day, trading near 1.0550, marking fresh yearly lows during Thursday's Asian session. This downside of the pair is mainly attributed to the strengthening US Dollar (USD), driven by "Trump trades."

Traders await the release of Gross Domestic Product (GDP) data for the Eurozone on Thursday, with the third-quarter GDP figure expected to confirm a preliminary growth estimate of 0.4% quarter-over-quarter. Meanwhile, the year-over-year GDP is forecast to show a modest 0.9% growth for Q3, indicating a lackluster economic performance in the region.

The focus will shift to European Central Bank (ECB) President Christine Lagarde, who is expected to deliver remarks at the Choiseul Sovereignty Awards 2024 ceremony in Paris, France. Meanwhile, Fed Chair Jerome Powell will be in the spotlight during a panel discussion titled "Global Perspectives," hosted by the Federal Reserve Bank of Dallas.

The US Dollar Index (DXY), which tracks the value of the US Dollar against six major peers, remains steady around 106.60, its highest level since November 2023, supported by rising US Treasury yields. As of now, the 2-year and 10-year US Treasury yields are at 4.31% and 4.47%, respectively.

The US Consumer Price Index (CPI) rose by 2.6% year-over-year in October, matching market expectations, following a 2.4% increase in the previous month. The monthly CPI held steady at 0.2% MoM as expected. Meanwhile, the core CPI, which excludes the more volatile food and energy sectors, met market expectations, holding at 0.3% MoM and 3.3% on an annualized basis.

• EUR/USD has edged further lower, inching toward 1.0550.
• Euro continues to find little support in broader markets.
• EU GDP, US PPI inflation updates due Thursday.

EUR/USD continued to drift into the basement on Wednesday, clipping into a 54-week low and settling within touch range of 1.0550. Fiber continues to shed weight on the charts as broader FX markets pivot full-bore into holding the Greenback. 

US Consumer Price Index (CPI) inflation figures came in stickier than many had hoped, but still well within median market forecasts, helping to keep investor sentiment elevated. Headline CPI held steady at 0.2% MoM as expected, while annualized headline CPI inflation accelerated to 2.6% YoY from the previous 2.4%, as markets predicted. Core CPI inflation also met market expectations, holding at 0.3% MoM and 3.3% on an annualized basis.

Euro traders will be looking ahead to pan-EU Gross Domestic Product (GDP) growth figures due early Thursday; final GDP growth is unlikely to buck the previous preliminary figures, and EUR bulls will have their fingers crossed that final GDP in the third quarter will stick to 0.4% QoQ, while the annualized figure is forecast to hold steady at a thoroughly unremarkable 0.9% YoY.

Also coming up on Thursday will be a fresh print of US Producer Price Index (PPI) business level inflation, which is forecast to accelerate in October to 3.0% from 2.8% YoY. 

EUR/USD price forecast

The EUR/USD daily chart reveals a strong bearish trend, as the pair trades firmly below both the 50-day (blue line) and 200-day (black line) exponential moving averages (EMAs), currently at 1.0882 and 1.0884, respectively. This alignment, with the 50-day EMA below the 200-day EMA, signifies a bearish outlook in both the short and long term. The recent sell-off has pushed the pair closer to a significant psychological level at 1.0550, which could act as immediate support. If this level fails to hold, further declines may be on the horizon.

The MACD indicator on the chart underscores the prevailing bearish momentum. The MACD line is positioned below the signal line in negative territory, reflecting strong selling pressure. Furthermore, the expanding gap between the MACD and signal lines, along with a series of red histogram bars, indicates that bearish momentum is still intact. Without signs of a bullish divergence, the technical picture suggests limited buying interest, and any potential recovery could be met with resistance around the moving averages.

Looking ahead, a sustained break below the 1.0550 support level could open the door to a deeper retracement, possibly targeting the 1.0500 level in the coming sessions. On the flip side, for EUR/USD to reclaim a more bullish outlook, it would need to break back above the 200-day EMA, currently around 1.0884. Such a move would likely require a shift in market sentiment, potentially triggered by favorable economic data from the Eurozone or broad-based U.S. dollar weakness. Until such a recovery materializes, the technical setup remains bearish, with further downside expected if the support at 1.0550 gives way.

EUR/USD daily chart

• EUR/USD slipped below 1.0600 on Wednesday, heading into 1.0550.
• A brief recovery off the back of US CPI inflation is unlikely to hold.
• Euro is set to close in the red against the Greenback for a fourth straight day.

EUR/USD continued to backslide on Wednesday, falling into 1.0550 and finding only a meager bounce from 54-week lows after US Consumer Price Index (CPI) inflation for October printed closely to median market forecasts. The Euro continues to shed fans as market participants struggle to find reasons to bid Fiber, leaving EUR/USD at the mercy of broad-market US Dollar flows.

US CPI inflation for October came in broadly as-expected on Wednesday, however final figures failed to make any progress toward cooling targets, and key annual measures accelerated on a yearly basis. US CPI rose 0.2% MoM in October, in-line with the previous month’s inflation print, while ‘supercore’ CPI for the year ended in October rose 4.37% YoY compared to the previous period’s print of 4.26%.

The US Dollar eased slightly post-CPI, giving Fiber a chance to recover its stance from year-long lows, however momentum remains thin as global markets broadly focus on US labor figures to spark further rates cuts from the Federal Reserve (Fed).

EUR/USD price forecast

With the Euro testing 54-week lows against the Greenback, the pressure is on for bidders to find a floor and push off from it before things decay to the point that EUR/USD backslides below the technical floor priced in near 1.0500. It’s been a sharp turnaround in Fiber bids this year: just seven weeks ago, the Euro had set a year-plus high against the US Dollar just shy of 1.1300.

EUR/USD daily chart

The Euro (EUR) continued to trade lower amid political uncertainties in Germany. Minority government faces economic and diplomatic challenges. EUR was last seen at 1.0612 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Daily momentum is bearish

“PM Scholz is seeking confidence vote earlier on 16 Dec instead of 15 Jan – but is expected to lose. Snap elections likely planned for 23 Feb. Elsewhere, EUR is likely to bear the brunt of the US election outcome. Trump presidency will result in shifts in US foreign, trade policies.”

“The potential 20% tariff (if implemented) can hurt Europe where growth is already slowing, and that US is EU’s top export destination. EU-UST yield differentials have already widened and may widen further as markets speculate on a dovish ECB, with chatters of 50bp cut at Dec meeting.”

“Daily momentum is bearish while RSI fell. Support at 1.06 levels (2024 low). Breach below this support will open way for further downside towards 1.0450/1.05 levels. Resistance at 1.0740 (76.4% fibo), 1.0810/30 levels (21 DMA, 61.8% fibo retracement of 2024 low to high).”

• EUR/USD remains vulnerable amid uncertainty over a potential trade war between the Eurozone and the US.
• ECB’s Rehn sees the Deposit Facility rate heading to the neutral rate in the first half of 2025.
• Investors await US inflation data and speeches from a slew of Fed officials.

EUR/USD extends its losing spell for the fourth trading day and touches a fresh year-to-date (YTD) low of 1.0592 during the European session on Wednesday amid caution ahead of the United States (US) Consumer Price Index (CPI) data for October, which will be published at 13:30 GMT. 

The CPI report is expected to show that the annual headline inflation accelerated to 2.6% from 2.4% in September. The core CPI – which excludes volatile food and energy prices – rose steadily by 3.3%.

The inflation data will influence market expectations for the Federal Reserve’s (Fed) likely monetary policy action in December. The Fed is expected to cut interest rates again by 25 basis points (bps) to 4.25%-4.50% next month, according to the CME FedWatch tool. However, the likelihood has eased to 62% from 70% a week ago. Market expectations for a Fed interest rate cut in December have lately slightly faded as investors expect that the United States (US) economic outlook will improve and price pressures will escalate under President-elect Donald Trump’s administration.

Trump vowed to raise import tariffs by 10% and lower corporate taxes in his election campaign. This move will increase demand for domestic goods and boost labor demand and business investment, eventually prompting inflationary pressures and forcing the Fed to follow a more gradual rate-cut cycle.

On Tuesday, Minneapolis Federal Reserve Bank President Neel Kashkari cautioned at a Yahoo! Finance event, "If inflation surprises to the upside before December, that might give us pause.” Kashkari added that the monetary policy is "modestly restrictive right now," and expects economic growth to persist.

In Wednesday’s session, investors will also focus on speeches from a slew of Fed officials for fresh guidance on interest rates.

Daily digest market movers: EUR/USD remains under pressure on Euro’s underperformance

• Euro’s (EUR) underperformance from the past week across the board has also kept the major currency pair on the back foot. The Euro is downbeat due to multiple headwinds, such as a potential trade war between the Eurozone and the US and the collapse of the German three-party government.
• On Tuesday, European Central Bank (ECB) Governing Council Member and Bank of Finland Governor Olli Rehn suggested that Europe should position itself better ahead of Trump’s second term. "If a trade war were to start, Europe must not be unprepared,” Rehn said. A trade war between both sides of the Atlantic looks likely, as Trump mentioned in his election campaign that the euro bloc will "pay a big price" for not buying enough American exports.
• When asked about his views on the ECB interest rate outlook, Rehn commented that the Deposit Rate could decline to the so-called neutral rate in the first half of 2025, Reuters reported. According to the ECB staff, the neutral rate is around 2% or 2.25%.
• Meanwhile, the collapse of the German three-party coalition after Chancellor Olaf Scholz sacked Finance Minister Christian Linder last week has also been a major cause of weakness in the Euro. According to a Focus Online report, German Olaf will call a confidence vote on December 18 and the snap election on February 23.
• Going forward, investors will focus on ECB President Christine Lagarde’s speech for fresh interest rate guidance, which is scheduled for Thursday.

Technical Analysis: EUR/USD remains weak near YTD lows around 1.0600

EUR/USD hovers near the fresh year-to-date low around 1.0600 in European trading hours on Wednesday. The major currency pair is expected to face more downside, with the 20-day Exponential Moving Average (EMA) turning vertically south near 1.0800.

The return of the 14-day Relative Strength Index (RSI) in the range of 20.00-40.00 indicates bearish momentum gaining traction and adds to evidence of more downside.

Looking down, the pair could decline to near the psychological support of 1.0500 after breaking below 1.0600. On the flip side, the round-level resistance of 1.0700 will be the key barrier for the Euro bulls.

(The story was corrected at 10:30 GMT to say in the first bullet of daily digest market movers that "The Euro is downbeat due to multiple headwinds not tailwinds")

Barring a break above 1.0660, EUR could decline further to 1.0585 before stabilisation can be expected. In the longer run, downward momentum remains strong; the focus is on 1.0555. The next technical objective below 1.0555 is at 1.0500, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

The focus is on 1.0555

24-HOUR VIEW: “Yesterday, when EUR was at 1.0655, we highlighted that it ‘could decline further, but the major support at 1.0600 could be just out of reach.’ Our view of a lower EUR was correct, even though it fell more than expected to 1.0594, recovering to close at 1.0623 (-0.29%). Not surprisingly, after dropping sharply over the past few days, conditions are deeply oversold. However, the weakness has not stabilised. Today, barring a break above 1.0660 (minor resistance is at 1.0640), EUR could decline further to 1.0585 before stabilisation can be expected. This time around, the next major support at 1.0555 is likely out of reach.”

1-3 WEEKS VIEW: “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.’ Following a break below 1.0665 on Monday, we indicated yesterday (12 Nov, spot at 1.0655) that ‘We will continue to hold a negative EUR view as long as 1.0760 (‘strong resistance’ level) is not breached.’ We added, ‘if EUR breaks below 1.0600, the focus will shift to 1.0555.’ In NY trade, EUR broke below 1.0600 and reached 1.0594. While conditions are oversold, downward momentum remains strong. As indicated, the focus is now on 1.0555. On the upside, the ‘strong resistance’ level has moved lower to 1.0705 from 1.0760. Looking ahead, if EUR were to break below 1.0555, the next technical objective lies at 1.0500.”