FOREX fundamental analysis for EUR/USD on January 24, 2025
When the EUR/USD exchange rate depends solely on the rhetoric of the US president, the volatility of currency pairs is inevitable. Morgan Stanley analysts note that there are still enough "bulls" for the dollar in Forex, but their positions are starting to weaken. The reason is the slowdown in inflation, which may prompt the Federal Reserve to lower interest rates. In addition, the lack of progress in fiscal negotiations in Congress and a softer US trade policy also threaten the dollar's position. However, the dollar needs a trigger, and recently this role has been played by Donald Trump's statements.
Davos and Trump's ambitions
At the World Economic Forum in Davos, the US president stressed that businesses should produce products in America, promising the lowest tax rates in the world for those who fulfill this condition. Otherwise, according to him, tariffs will follow. In addition, he demanded that OPEC lower oil prices, arguing that this would slow down inflation.
Donald Trump attributes lower energy prices to lower inflation, arguing that this will create conditions for lower Fed rates. Although energy resources did make a significant contribution to the growth of the PCE price index in 2024 (by 40%), core inflation remains above 3%. According to forecasts by Wall Street Journal experts, the inflation rate in 2025 may rise to 2.7%, due to the pro-inflationary policy of the Trump administration.
Global risk appetite and EUR/USD movement
Trump's harsh statements about oil and ending the conflict in Ukraine have caused a surge of optimism in global stock markets. US indices have reached new historical highs, and global risk appetite has supported EUR/USD.
The US president also stated his commitment to ending the armed conflict in Ukraine, emphasizing the role of OPEC, which, according to him, hinders the achievement of peace by its actions. If the situation in Eastern Europe stabilizes, this could be a significant factor in strengthening the euro. Recall that in 2022, the EUR/USD exchange rate fell below parity due to the energy crisis in Europe. The resumption of gas supplies and lower prices could stimulate the economic recovery of the Eurozone.
The euro was also supported by Trump's words that he does not seek to impose new tariffs against China, noting that he has "always had good relations" with Xi Jinping. However, investors remember how in 2018-2019, similar comments by the US president were accompanied by the imposition of duties.
EUR/USD technical analysis
EUR/USD is growing and approaching the maximum on January 22. If the quotes consolidate above the extreme, then buyers will try to break through the Target zone of 1.0481 - 1.0453. If successful, the growth will continue to the Golden zone of 1.0554 - 1.0545.
We will open new purchases in the uptrend format on a corrective decline to the support areas of 1.0365 - 1.0356 and 1.0319 - 1.0305. The main target of buyers will be the maximum on January 22.
Forecast and trading strategy for EUR/USD
Reactions to Donald Trump's statements are difficult to predict due to his volatile rhetoric, but markets continue to adapt. Expectations for a Fed rate cut remain moderate, and an end to the conflict in Ukraine and lower oil prices still look like long-term prospects.
Trading Plan
Our forex trading strategies give preference to EUR/USD sales on any corrective growth. Optimal levels for forming short positions:
• 1,047
• 1,054