FOREX Fundamental analysis for EUR/USD on November 29, 2024
Investors are increasingly convinced that Donald Trump's tough statements are not always accompanied by decisive actions. His tactics of pressure through threats of tariffs are causing the US dollar to lose ground. The greenback ends one of the worst weeks in the last three months. This was caused by the weakening of expectations from the "Trump trade", namely, the seasonal rebalancing of portfolios, the reduction of long positions by traders and a decrease in the yield of US treasury bonds.
Attention to EUR/USD was fueled by Trump's recent tweet about a "wonderful conversation" with Mexican President Claudia Sheinbaum, where issues of combating migration and drug trafficking were discussed. This statement mitigated the threat of imposing 25% tariffs against US neighbors, previously presented as a pressure tool for negotiations.
Even ECB President Christine Lagarde stresses the need for constructive dialogue with the US administration, recalling that protectionism weakens global demand, and such measures undermine rather than strengthen the economy.
Positive data from the Eurozone, including stronger inflation figures in Germany and Spain, as well as improved economic sentiment, reduced the likelihood of an ECB rate cut at the December meeting. Together with the weakening of the "Trump trade", this supports the growth of the euro. At the same time, the probability of keeping the Fed rate unchanged fell to 33%, which also plays into the hands of EUR/USD.
However, the strengthening of the euro may be short-lived. The projected increase in inflation in the Eurozone above the expected 2.3% is able to support the euro only for a short period, since inflation is likely to return to decline at the beginning of 2025 due to the weakness of the economy and the deterioration of the labor market situation.
At the other pole is the USA. November labor market statistics are likely to turn out to be strong, which will increase the likelihood of a suspension of the Fed's monetary policy easing, increase bond yields and strengthen the dollar again.
Current expectations often anticipate the market, so EUR/USD may start to fall even before the publication of official NFP data. The price increase to $1.0615–1.07 should be considered as a selling opportunity, especially if the euro cannot stay above the $1.06 level.
EUR/USD Technical analysis
EUR/USD is trading in a short-term uptrend. The main goal of strengthening the pair is the target zone of 1.0636 - 1.0608. If this area is broken up during trading, then the next target will be the "golden zone" 1.0709 - 1.0700.
We will consider new purchases on correction from strong support levels, which are: support areas (A) 1.0495 - 1.0486 and (B) 1.0449 - 1.0435. If the price tests the support area (A) and growth begins after that, then the first target of buyers will be the level of 1.0536, and the second target will be the maximum on November 27 at 1.0587