- The US Federal Reserve's affirmation of not rushing to cut interest rates, coupled with Trump's election victory, has extended the US dollar's gains.
- This has increased selling pressure on the EUR/USD currency pair, driving it down to 1.0496, its lowest level in a year.
- Last Friday, the euro attempted to rebound but gains were capped at 1.0592, and amidst stronger bearish control, the pair closed the week lower around the support level of 1.0538.
Trump Could Drive Euro/Dollar to Parity
According to Forex trading, the sharp losses that followed the announcement of Trump's victory, which was followed by strong gains for the US dollar, its highest in two years, increased talk about the possibility of the euro/US dollar moving to the parity price of 1:1 in light of Trump's trade policies. Especially, if the trade wars between the Eurozone and the United States expand. With the euro dollar breaking the 1.0440 level, these expectations may increase. Specifically, since they coincide with devastating economic and political issues that threaten the future of the single European currency area.
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Concerns about Germany Will End Euro Gains
Given the increasingly gloomy outlook for the recovery of the German economy, coupled with the continued easing of European Central Bank policy, you should consider that any gains for the euro in the forex market may be subject to a rapid collapse. According to reliable trading platforms, the EUR/USD is around 1.0538, the EUR/JPY is around 162.64, the EUR/AUD is around 1.6300, and the EUR/GBP is around 0.8350, according to the latest trading price updates.
Will Germany See New Leadership?
The economic recession could hit the current German leadership. Markets are watching the agenda of the Christian Democratic Union leader who is vying to succeed Olaf Scholz. Dear reader, beware that the return of Donald Trump means that the next German government may have to deal with a global trade war, complicated relations with Beijing, and possibly difficult choices regarding the conflict in Ukraine – with extremist parties ready to capitalize on any misstep. Amid this tension, the Council of Economic Experts, which advises the German government, has scrapped its economic growth forecast for 2024 to predict a second year of contraction, followed by a small economic growth rate of 0.4% in 2025.
European Central Bank Policies
The US Federal Reserve's recent affirmation that it will not rush to cut interest rates if the US economy is strong is widening the gap between it and the European Central Bank's policies, which are following a rate-cutting path and will not change its direction in the face of current European political and economic concerns. Obviously, this would be a significant downward pressure factor for the EUR/USD in the coming months. Recently, the European Central Bank has cut interest rates three times since last June due to declining inflation and a slowdown in the eurozone economy. Currently, It is widely expected that interest rates will be cut again in December 2024, when policymakers receive updated forecasts that will help them assess the outlook for the eurozone.
EUR/USD Technical Analysis and Forecast:
Technically, the downward trend of the EUR/USD currency pair is getting stronger by breaking the support at 1.0500 consolidates the bears' control. According to the direction of the technical indicators, the next most important support levels will be 1.0440 and 1.0390, which in turn will move the technical indicators towards strong oversold levels and increase expectations for the EUR/USD price to move towards the parity price. Conversely, and on the same time frame, the daily chart for a break of the downward trend on the bulls will push the EUR/USD price towards the resistance levels of 1.0750 and 1.0840, respectively.
We advise you to sell the EUR/USD pair from each upward level.
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