FOREX Fundamental analysis for EUR/USD on November 25, 2024
The end of 2024 is marked by an all-American trend: Donald Trump's policy strengthens the role of the United States on the world stage, and the dollar continues to gain weight in forex currency trading.
The EUR/USD pair reached the target level of 1.035, but soon recovered due to the appointment of Scott Bessent as US Treasury Secretary. Bessent advocates a weakening of the dollar and the support of the shadow chairman of the Fed, which weakens the position of the greenback.
The Trump effect and pressure on the euro
Trump's return has brought with it long-standing fears of investors - tightening trade policy and imposing tariffs threaten the Eurozone economy. The Euroblock composite PMI index fell to 48.1, indicating a reduction in economic activity.
Against this background, the probability of a 50 basis point reduction in the ECB deposit rate in December increased from 30% to 55%. SEB experts predict that the rate may decrease to 1.5% in the coming months, which, in turn, pushes EUR/USD to parity. In the entire history of the euro, it has approached parity with the dollar only twice — the last time in 2022 due to the war in Ukraine and the energy crisis. Today, similar problems, including rising gas prices and the escalation of conflict in Eastern Europe, are putting pressure on the single currency again
The role of the Issuer in correcting the dollar exchange rate
The appointment of Scott Bessent has made adjustments to Trump's trade strategy. The new finance minister, who prefers diplomatic methods instead of harsh tariffs, has softened the rhetoric. He also criticized the Fed's 50bp rate cut in September, calling it a politically motivated decision, and expressed hope that the shadow chairman of the Fed would limit Jerome Powell's influence on the markets.
History may repeat itself: as in 2016, after the election of Trump. At that time, the US dollar index grew rapidly by 5%, but by May 2017 it began to lose ground among other forex currency indices. At that time, the weakening of the dollar in December was partly explained by the Christmas rally of stock markets. The last month of the year traditionally turns out to be weak for the greenback.
What awaits the euro and the dollar?
It seems that Trump is trying to soften relations with financial markets, which he considered an important indicator of his policy in the past. If the October minutes of the Fed meeting show a "dovish" mood, and inflation in Europe accelerates in November, the probability of an ECB rate cut in December may decrease, which will support the euro.
If the bulls manage to keep EUR/USD above the 1.0455 level, the pair has a chance of further growth. After working out the sellers' target of 1,035, traders should prepare for the consolidation of the pair in the coming weeks.
EUR/USD Technical analysis
After reaching the Target zone 1.0386 - 1.0367, EUR/USD went into correction within the short-term downtrend. As a result, today the quotes are testing the resistance area (A) 1.0484 - 1.0470. If this zone is held by sellers, then it will be possible from here to consider sales with the first target at 1.0408 and the second at about 1.0332.
If, as a result of today's trading, the pair breaks through the resistance area (A) and fixes higher, then the short-term trend will change to an upward one. In this case, starting tomorrow, it will be possible to look for entry points for purchases with a target in the upper Target zone of 1.0636 - 1.0608.