The EURUSD currency pair failed to correct Monday’s strong gains during yesterday’s trading session. Quotes fell to the 1.035 level, but by the end of Tuesday, the pair managed to reverse and even show a slight increase. Nevertheless, the pressure of the sellers will surely continue, especially if the bulls try to develop an upward movement. In the coming days, there is a high probability of another test of the 1.035 level.
Financial market participants continue to analyze the consequences of Donald Trump’s first steps after his return to the US presidency. Although the most radical scenarios have been avoided, the current situation continues to indicate significant risks of strengthening the dollar against other currencies. The Bloomberg survey showed that investors are increasingly concerned about a new wave of accelerating inflation. As a result, the Fed may not only pause the monetary easing cycle, but also return to raising interest rates.
ECB officials, on the other hand, are confident about the need to further lower borrowing costs in the region. Speaking yesterday, the ECB’s spokesman, Francois Villeroy de Galhau, reiterated the intention to cut interest rates by 0.25% at each meeting in the first half of 2025. This should bring the deposit rate down to 2% by June from the current 3%. This is necessary to support the weak growth of the eurozone economy.
Taken together, the actions of the Fed and the ECB could lead to parity in the EURUSD pair. This is the forecast of UBS analysts, who note the possibility of rates falling to 0.985. Specialists of the Swiss bank admit that most of the factors in favor of the growth of the dollar rate are already embedded in the current prices, but this does not mean a mandatory reversal of the trend. A significant strengthening of the euro against the US currency will require a sharp acceleration of the EU’s GDP growth, which is difficult to expect even in the medium term.
While EURUSD has failed to consolidate above 1.047, the main scenario remains a new pullback to 1.035.
Consider the following trading strategy:
Selling EURUSD at the current price. Take profit – 1,035. Stop loss – 1.047.
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