EUR/USD Price Analysis – Dec 30, 2024
Daily Price Outlook
During the European trading session, the EUR/USD currency pair struggled to hold onto its modest gains and edged lower around the 1.0415 level, hitting an intraday low of 1.0409.
This downward move can largely be attributed to a combination of factors, including the thin trading volume due to year-end liquidity, which is common during the holiday season.
Moreover, the Euro has also faced bearish pressure in the final months of 2024, with a near 5.5% decline against the US Dollar (USD) as the European Central Bank (ECB) stuck to its dovish stance on interest rates, disappointing investors who had hoped for a more aggressive approach to combat inflation.
Meanwhile, the concerns over the Eurozone’s economic health have been mounting, particularly with the threat of tariff hikes under US President-elect Donald Trump. These tariffs are expected to negatively impact the Eurozone’s export-driven economy.
US Dollar Strength and Its Impact on EUR/USD Amid Economic Data and Fed Expectations
On the US front, the broad-based US dollar has been gaining strength, consolidating near a four-day support level as trading volume remains thin during the year-end period.
The Greenback is on track to close the year near its highest level, with higher Treasury yields providing a strong boost.
US bond yields have been rising recently as investors expect the policies under President-elect Trump, like higher tariffs and tax cuts, to drive economic growth and inflation.
The Fed has already signaled fewer interest rate cuts for 2025 in its latest projections, with Federal Fund rates expected to be around 3.9% by the end of the year.
After a hawkish rate cut in December, Goldman Sachs predicts the Fed will cut rates again in March, with two more cuts expected in June and September.
This week, investors are focused on the US ISM Manufacturing Purchasing Managers’ Index (PMI) data for December, due on Friday. The PMI is expected to drop slightly to 48.3 from 48.4, indicating that manufacturing output is slowing down at a slightly faster pace.
Therefore, the strengthening US dollar, driven by higher Treasury yields and Fed policy expectations, puts downward pressure on the EUR/USD pair.
ECB’s Dovish Policy and US Tariff Concerns Weigh on the Euro
On the EUR front, the EUR/USD currency pair is set to close the year with a nearly 5.5% decline against the US Dollar, largely due to the European Central Bank’s (ECB) dovish stance on interest rates.
The Euro has been especially weak in the last three months of 2024, as market participants are concerned about the Eurozone’s economic growth.
This worry is compounded by the incoming tariff hikes from US President-elect Donald Trump, which are expected to negatively impact the Eurozone’s export sector.
The ECB has already lowered its Deposit Facility rate by 100 basis points to 3% this year, and it’s expected to cut it further to 2% by the middle of 2025.
This would indicate that the ECB plans to lower its key borrowing rates by 25 basis points at each meeting during the first half of next year.
Many ECB officials are concerned about inflation falling below their target of 2%, particularly with the political uncertainty in Germany and potential trade tensions with the US.
Therefore, the ECB's dovish stance and anticipated rate cuts, combined with concerns over Eurozone growth and US trade tensions, are likely to weaken the Euro further.
As a result, EUR/USD is expected to remain under pressure, potentially leading to continued declines.
EUR/USD – Technical Analysis
EUR/USD is trading at $1.04223, up 0.03% in the latest session, reflecting mild bullish sentiment as the pair hovers just below its pivot point at $1.04430. This level serves as a critical juncture for directional movement.
A sustained move below the pivot suggests bearish momentum, with immediate support at $1.03843 and further downside targets at $1.03430 and $1.03003.
Resistance levels are clustered at $1.04753, $1.05029, and $1.05453, forming a significant barrier for any upward movement.
The Relative Strength Index (RSI) at 54 indicates neutral to slightly bullish momentum, with no signs of overbought conditions. Meanwhile, the pair is trading slightly above the 50 EMA, which sits at $1.04117, signaling modest support for short-term gains.
The 4-hour chart reveals consolidation near the pivot point, suggesting indecision among traders. A sell strategy below $1.04427 with a target of $1.03836 and a stop loss at $1.04752 aligns with current technical trends.
However, a decisive breakout above $1.04430 could pave the way for testing the resistance at $1.04753. Market participants should remain vigilant as the pair navigates this critical zone, with key U.S. data releases likely to shape sentiment.
Related News
- GOLD Price Analysis – Dec 30, 2024
JOIN LONGHORNFX TODAY
24/7 live support, lightning fast withdrawals, guaranteed safe and reliable trading platforms with a true ECN broker.