The EUR/USD currency pair is currently facing pressure due to a strong US Dollar and concerns surrounding the European Central Bank’s (ECB) policy direction. The ongoing US election and fears of a potential trade war are also contributing to the downward trend of the Euro. Let’s delve deeper into the key factors influencing this currency pair:
ECB Policymakers Send Mixed Signals
The US election has sparked worries in the EU about a potential trade war and its impact on the Euro Area. Mixed signals from ECB policymakers have kept the Euro under pressure, especially after an attempted rally at the start of the European session. Investors will be closely monitoring a speech by ECB President Christine Lagarde for insights into the ECB’s stance on a Trump Presidency.
Earlier today, ECB Vice President Luis de Guindos expressed concerns about economic growth overshadowing high inflation worries. The possibility of a trade conflict between the Eurozone and the US looms large, especially after Trump’s campaign statements regarding consequences for the Eurozone’s lack of American goods purchases.
Rate Differential Concerns Grow
With strong US data and improving economic indicators, markets are pricing in fewer rate cuts from the Federal Reserve. This has bolstered the US Dollar while the ECB grapples with sluggish growth and potential rate cuts. The interest rate differential between the Fed and ECB is a significant factor to watch, as it could lead to further losses for EUR/USD if the gap widens.
As it stands, the ECB is expected to cut rates by over 140 basis points through December 2025, while the Fed is projected to cut around 70 basis points. This substantial difference in rate cuts could increase the likelihood of a weaker Euro against the Dollar.
ECB and Federal Reserve Implied Rates – December 2025
ECB
FED
Looking ahead, key economic data releases from both the US and EU will play a crucial role in determining market sentiment. The Euro Area, in particular, faces concerns about future growth prospects, while the US economy’s strength will be closely scrutinized through PMI data and job creation figures.
For a comprehensive overview of the upcoming economic events, refer to the Economic Calendar.
Technical Analysis of EUR/USD
From a technical perspective, EUR/USD is currently holding above the key psychological level at 1.0500. While an inverse hammer candle hinted at potential upside, downward pressure persists on the pair. The RSI indicator suggests oversold conditions, signaling a possible reversal in the near future.
Immediate resistance levels are at 1.0600 and 1.0700, with a potential retest of the descending trendline around 1.0755. On the downside, support is expected at 1.0450 and 1.0366 if the pair breaks below 1.0500.
EUR/USD Daily Chart, November 18, 2024
Support: 1.0450, 1.0366
Resistance: 1.0600, 1.0700
For more in-depth analysis, refer to the original post.
In conclusion, the EUR/USD currency pair is currently under pressure due to various factors, including a strong US Dollar, concerns about ECB’s policy direction, and fears of a potential trade war. Investors should closely monitor key economic data releases and ECB/Fed implied rates to gauge future market movements and make informed investment decisions.