EUR/USD Price Analysis – Jan 01, 2025
Daily Price Outlook
During the European trading session, the EUR/USD currency pair saw some bullish movement, trading around the 1.0358 level and even reaching an intra-day high of 1.0358. This rebound was largely driven by a weaker US Dollar, which has been under pressure due to declining Treasury yields.
Despite this short-term gain, the Euro faces ongoing challenges as the European Central Bank (ECB) has kept its stance on interest rates dovish for the coming year, which weighs on the Euro. Meanwhile, safe-haven outflows have added pressure to the Euro, especially as global uncertainty grows.
Moreover, the ongoing Russia-Ukraine conflict and tensions in the Middle East have spiked geopolitical risks, making investors more cautious and putting further strain on the Euro. These factors combined are likely to limit the EUR/USD pair's momentum in the near term.
Euro Faces Pressure from Geopolitical Risks and Safe-Haven Flows
On the EUR front, the European Central Bank (ECB) is taking a cautious approach with its interest rate policy for next year, which is weighing on the Euro and the EUR/USD pair. This year, the ECB lowered its Deposit Facility rate by 100 basis points (bps) to 3%.
Looking ahead, it’s expected that the ECB will reduce the rate further to 2% by June 2025, which policymakers consider a neutral rate.
This indicates that the ECB may cut its borrowing rates by 25 bps at each meeting in the first half of 2025, signaling a more dovish stance. As a result, the Euro faces downward pressure, limiting its potential to rise against the US Dollar.
On the other hand, the Euro is facing more challenges due to increased geopolitical risks. The ongoing Russia-Ukraine conflict and tensions in the Middle East are creating uncertainty in the global markets.
Recently, Israel's ambassador to the United Nations warned Yemen's Iran-backed Houthi militants to stop their missile attacks on Israel.
These geopolitical risks are pushing investors to move away from riskier assets, leading to outflows from the Euro. As a safe-haven currency, the US Dollar benefits in such times, further putting pressure on the Euro and the EUR/USD pair.
In addition to the ECB's actions, the Euro is facing more challenges due to rising geopolitical risks. The ongoing Russia-Ukraine conflict and increasing tensions in the Middle East are causing uncertainty in the global markets.
Recently, Israel’s ambassador to the United Nations, Danny Danon, warned Yemen's Houthi militants, backed by Iran, to stop their missile attacks on Israel.
Such geopolitical events tend to drive investors away from riskier assets, including the Euro, and into safe-haven assets like the US Dollar. This added risk further pressures the Euro, limiting its strength against other currencies.
EUR/USD – Technical Analysis
The EUR/USD pair is trading at $1.03549, down 0.49% as bearish sentiment dominates the short-term market outlook. On the 4-hour chart, the pivot point at $1.03441 is critical, acting as a key threshold for near-term momentum.
Immediate resistance is observed at $1.03826, with higher levels at $1.04236 and $1.04581. Conversely, support is positioned at $1.03100, with further protection at $1.02750 and $1.02355, offering potential stabilization in case of extended selling pressure.
Technical indicators highlight bearish conditions, with the RSI at 33, signaling an oversold market ripe for a potential corrective bounce. However, the pair is trading below the 50 EMA at $1.04066, reinforcing a bearish bias in the short term.
A break below the pivot point of $1.03441 could accelerate selling, targeting the $1.03100 support level. On the upside, reclaiming $1.03826 resistance may encourage buyers, potentially driving the price toward $1.04236.
Market participants should closely monitor the $1.03441 pivot point, as sustained trading above it could signal a reversal of the bearish trend.
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