- The EUR/USD currency pair's recent attempts to rebound have failed, with gains not exceeding the resistance level of 1.0354. Following the release of US inflation data, the EUR/USD pair has resumed its broader downward trend, stabilizing around the support level of 1.0285 at the time of writing this analysis.
- As previously mentioned, the divergence between the policies of the European Central Bank and the US Federal Reserve, as well as economic performance and the future of US trade wars under the new administration, will continue to be factors that weaken any attempts by the euro dollar to rise.
Contraction of the German Economy
According to official figures, Germany's gross domestic product contracted by 0.2% in 2024, following a 0.3% contraction in 2023, in line with market expectations. The manufacturing sector experienced a significant decline in output (-3%), with key sectors such as machinery and automobiles declining. The construction industry also suffered, with a 3.8% decline in gross value added due to rising construction and interest rates, despite growth in civil engineering. The services sector grew by 0.8%, but performance varied: the trade, transport, and accommodation sector remained stagnant. Meanwhile, the information and communication sector grew by 2.5%. Business services remained unchanged.
Also, reported was that gross fixed capital formation fell by 2.8%, mainly in construction and machinery. Household consumption rose slightly (0.3%), with spending on health and transport rising. Government consumption grew by 2.6%, driven by higher social benefits. Foreign trade struggled, with exports down 0.8% and imports up slightly by 0.2%.
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Dear TradersUp follower, keep in mind that the Euro-Dollar path is on its way to parity soon, which is a historic event that will not be repeated often, so monitor the influencing factors carefully in the coming days
US stock indices rise after inflation figures
US stock markets rose, supported by strong bank earnings and a positive consumer price index report, which showed that core prices rose less than expected in December. The S&P 500 index rose by 2%, the Dow Jones gained nearly 800 points or 1.8%, and the Nasdaq 100 rose by 2.6%.
In general, the US Consumer Price Index highlighted progress towards the 2% inflation target set by the Federal Reserve, with the US Core Consumer Price Index rising by 3.2% on an annual basis, down from 3.3% in November. Now, investors are speculating that the US will cut interest rates later in 2025. Major banks also reported strong earnings, which lifted the US market. According to trading, JPMorgan shares rose 2.3% after beating earnings and revenue expectations and raising its net interest income guidance for 2025. Wells Fargo shares rose 7% after reporting a profit increase, Goldman Sachs shares jumped 6.1% on strong earnings and revenue, Citigroup shares rose 7.4%, and Bank of New York Mellon shares rose 7.7%.
Obviously, these sentiments were reinforced by lower bond yields and upbeat comments from US Federal Reserve officials about continued progress in reducing inflation.
EUR/USD Technical Analysis Today:
Dear reader, there is no change in our technical view of the performance of the Euro against the US Dollar EUR/USD. Technically, the general trend is still bearish and the move towards the parity price may happen if the bears move towards the support levels of 1.0220, 1.0170 and 1.0080 respectively. Thus, this is at the same time sufficient levels to push all technical indicators towards strong oversold levels, Led by the Relative Strength Index and the MACD indicator. On the other hand, and on the same time frame, the daily chart will not have an initial break of the downward trend without stability above the resistance of 1.0550.
Today, the Euro Dollar will be affected by the announcement of a package of US economic releases led by the announcement of US retail sales figures, the number of weekly jobless claims and the reading of the Philadelphia Industrial Index. Finally, this is in addition to the extent of investors' appetite for risk or not.
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