EUR/USD Rebounds Above 1.0800 Amidst US Dollar Correction

The EUR/USD pair showed signs of life on Thursday, reclaiming the area beyond 1.0800 after dropping near 1.0680 the previous day. This movement was in response to Donald Trump’s victory in the US election and the potential for a “Red Sweep.”

US Dollar Corrects Lower Following Post-Trump Gains

  • The US Dollar (USD) made a sharp U-turn, giving back most of its previous day’s gains past the 105.00 mark when measured by the Dollar Index (DXY).
  • US yields across various maturity periods also experienced a strong drop, contrasting with an increase in German 10-year bund yields.

Federal Reserve’s Interest Rate Decision

The Federal Reserve reduced its Fed Funds Target Range (FFTR) by 25 basis points to 4.75%-5.00% on Thursday, in line with expectations.

  • Policymakers noted that the employment market has “generally eased” as inflation approaches the 2% goal.
  • The Fed stated that threats to the employment market and inflation were “roughly in balance.”
  • Chair Jerome Powell indicated uncertainty in the economic outlook, emphasizing that no decision has been made on December’s policy action.

EUR/USD Future Outlook

Key policy decisions from the Fed and the ECB will influence the future of EUR/USD, with the Trump administration potentially impacting inflation and prompting the Fed to pause its current easing cycle.

  • The relatively strong US economy compared to the eurozone suggests the dollar may remain resilient in the short term.
  • EUR/USD may revisit the November low of 1.0682 if additional losses occur.

EUR/USD Short-Term Technical Analysis

Extra losses could lead to a revisit of the November low of 1.0682, while the November top of 1.0925 serves as an obstacle on the upside.

  • Initial resistance is at 1.0824, followed by the 200-SMA at 1.0932.
  • Initial support aligns at 1.0682, with further support at 1.0666 and 1.0649.

Analysis and Implications

The EUR/USD pair’s movement is influenced by political and economic factors, including the US election outcome and central bank policies. Understanding these factors can help individuals make informed decisions about their investments and financial future.

  • Political events, like elections, can impact currency movements and global markets.
  • Central bank decisions, such as interest rate changes, affect currency valuations and economic stability.
  • Monitoring economic indicators and technical analysis can provide insights into potential market movements and trading opportunities.
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