- The forecast for the EUR/USD remains bearish. Bearish dominance over the pair has settled at the 1.0400 support level in the last trading week of 2024.
- Meanwhile, negative pressure factors on the Euro remain strong and persistent and may take more time.
- Also, the disparity in economic performance and the future of central bank policies will provide more momentum for the bears to control the direction of the EUR/USD pair in the coming months.
The strength of the US economy continues to support the dollar
The US dollar price remained the strongest and reached its highest in two years, with strength factors represented by Trump’s trade and the demand for buying it as a safe haven, in addition to the US economy continuing to defy expectations of a slowdown. During 2024, despite uncertainty about the US presidential election, rising interest rates and a slowdown in the Labor market, economic growth remained strong. The United States is expected to be the best performing among the G7 economies, according to the International Monetary Fund’s forecasts.
However, the US economy has been subject to some relatively weak confidence factors. US inflation has recently proven to be slow to decline, prompting the Federal Reserve to adopt a higher-for-longer approach to US interest rates.
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The EUR/USD trend may remain bearish for a longer period of time if European political and economic concerns persist, and the dollar strength factors listed in the analysis persist
Future of US Federal Reserve Policy
US Federal Reserve officials began cutting interest rates in September amid concerns that the labor market was nearing a dangerous tipping point. Although they have become more optimistic in recent months as the country's unemployment rate has stabilized around levels that remain low by historical standards. At the same time, wage growth remains steady at around 4%, which should continue to support household finances. Concurrently, progress towards the Federal Reserve's 2% inflation target has stalled in recent months after a rapid decline in 2023 and further progress in the first half of 2024. Overall, while Fed officials chose to cut US interest rates by a full percentage point during 2024 in an attempt to ease some pressure on the economy, Fed Chair Jerome Powell indicated that central bankers need to see more progress on inflation before making additional cuts in 2025.
European stock markets recover
According to recent trading through stock trading platforms, European stock market indices maintained their gains, supported by most sectors despite a broad decline in European bond markets as investors continued to gauge corporate expectations for the coming year. According to trading, the Euro Stoxx 50 index rose by 0.7% to close at 4890 and the Stoxx 600 index rose by 0.5% to close at 507. Overall, light trading before the New Year holiday allowed investors to speculate on the impact of US interest rates, potential US tariffs, and whether a new rise in commodity prices could lead to a resurgence in inflation.
Bank and automotive stocks led the gains, with shares of BNP Paribas, UniCredit, Volkswagen, and Stellantis rising by nearly 2%. Outside the Eurozone, shares of Delivery Hero fell by 5.5% after Taiwan's antitrust authority rejected the sale of its Foodpanda business to Uber Technologies Inc.
EUR/USD Analysis Today:
There is no change in my technical view of the performance of the Euro against the US Dollar EUR/USD. As the general trend is still bearish, and stability below the support of 1.04 encourages bears to prepare for stronger downward penetrations to come. As we mentioned before, expectations of the Euro Dollar price moving towards parity will strengthen if the bears succeed in pushing the currency pair towards the support levels of 1.0365 and 1.0275 first. Oscillator indicators, the Relative Strength Index and the MACD are still in a bearish position and may be preparing to move towards strong oversold levels. Finally, we still prefer to sell the Euro Dollar from every upward level.
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