The EURUSD currency pair attempted to bounce back after hitting a 2-year low in late November. However, the bulls’ efforts were only able to reach the 1.06 level, where buying of the dollar against the euro resumed. From both a technical and fundamental point of view, it is unlikely that EURUSD will see a significant increase in quotes. There are much more chances of maintaining the weak price momentum with attempts to return to 1.042.
November’s dollar rally is over, but the American currency continues to hold almost all of last month’s gains. According to analysts at Goldman Sachs, this is due to expectations of pro-inflationary policies of President-elect Donald Trump. The imposition of high tariffs on imports from China and other countries could lead to an acceleration of 0.3–0.4% in underlying price growth in the US. As a result, PCE, the Fed’s favorite inflation gauge, will not return to its 2% target until at least the end of 2025.
Meanwhile, European investors are turning their attention to the ECB meeting scheduled for December 12th. According to Bloomberg, the regulator will not surprise traders with a sharp 0.5% rate cut, but will stick to a standard 0.25% move. The markets may be more influenced by the ECB’s new Economic Survey, which is expected to significantly lower expectations for inflation and GDP growth in the region. The pessimistic outlook for 2025 calls for a looser monetary policy to support the EU economy.
Taken together, the news from the US and Europe is likely to keep the EURUSD under pressure. According to a new Reuters poll, market participants expect the euro-dollar exchange rate to hover around 1.04 during the winter. Reaching parity is also not ruled out, although this scenario is not the main one. However, the development of the political crisis in France could bring the European and American currencies closer to parity.
The Stochastic indicator on the daily chart of EURUSD has given a sell signal, supporting the pair’s downward movement. The next target for the bears is the 1.042 level.
Consider the following trading strategy:
Sell EURUSD at current price. Take profit — 1.042. Stop loss — 1.06.
