Bearish View
- Sell the EUR/USD pair and set a take-profit at 1.0350.
- Add a stop-loss at 1.0500.
- Timeline: 1-2 days.
Bullish View
- Buy the EUR/USD pair and set a take-profit at 1.0500.
- Add a stop-loss at 1.0350.
The EUR/USD exchange rate remained in a tight range on Monday morning ahead of a relatively muted week for the forex market. The pair was trading at 1.0426 on Monday, a few points above this month’s low of 1.0350.
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Like other forex pairs, the EUR/USD pair will likely have a muted performance this week as it has always done in the last two weeks of the year. This period is usually characterized by low volume as many large institutional investors remain away from the market because of the Christmas and New Year celebrations.
There will be no major macro data this week, and the forex market will largely be closed on Wednesday for the New Year. The only important data that will come out this week will be the manufacturing and services PMI numbers from the United States and Europe.
These numbers are expected to show that the manufacturing sectors in the two regions remained on edge in December. The US and EU have seen struggling manufacturing activity despite huge investments by their governments.
The service sector, on the other hand, has done relatively well this year. While these are crucial numbers, their impact on the pair will be limited since they will not have an impact on the Fed and the European Central Bank.
The two banks have adopted divergent forward guidance on interest rates. In its last meeting, the Fed hinted that it will deliver two cuts in 2025 as it remained concerned about policies of the incoming Donald Trump administration. Trump has pledged to deport millions of undocumented immigrants and boost tariffs on imports.
The ECB, on the other hand, has pointed to more cuts in 2024 because most of its countries, including Germany and France are not doing well.
EUR/USD Technical Analysis
The daily chart for the EUR/USD pair is sending mixed signals on the pair. It dropped to a low of 1.0350 this month, reaching a key psychological point and the previous lowest level this year. It then rebounded and retested the resistance at 1.0448, the lowest swing in September last year. A break and retest is a popular continuation sign.
The pair has remained below the 50-day moving average. Therefore, it will likely maintain a bearish trend as long as it is below the key level at 1.0450. More downside trend will see it retest last week’s low at 1.0350.
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