EUR|USD – Pressure on the euro is likely to continue

The strength of the US dollar (greenback) in recent months is quite evident in the course of the US dollar index (DXY) and in the course of the EUR/USD currency pair. The devaluation of the European common currency, the euro, in the final quarter of 2024 is enormous; a slide from roughly 1.12 to around 1.03, or 900 pips, can be described as quite severe. 

The strength of the US dollar could continue in 2025. The new US government, the Trump administration, is unlikely to bring much good for the Eurozone economy. On the contrary, the punitive tariffs that have already been discussed on many sides could cause further damage. In direct comparison with the US economy, the economy within the Eurozone is literally paralyzed - the USA is easily growing twice as fast. In the semiconductor, IT technology and IT infrastructure and AI sectors, the Eurozone countries are not even close to holding a candle to the USA. 

Geopolitical developments must not be overlooked either. On the one hand, the war between Russia and Ukraine will unfortunately remain on the markets, while on the other hand, the vexed issue of the Middle East is always on the agenda when it comes to war and terror. New tensions between the USA and China and the Taiwan question also remain a risk. 

In addition to international developments outside the Eurozone, one must not forget to look at the development of national debt in France and Italy. In addition, Germany's economy remains extremely weak. 

Finally, the focus should be on the development of the interest rate gap. The interest rate development, the widening of the interest rate gap between the euro zone and the US dollar area, is likely to continue to be a key factor in the development of the EUR/USD exchange rate. In addition to repatriation phenomena, capital simply migrates to where it works better and earns better interest. 

A continued devaluation could therefore lead EUR/USD not only towards parity, but to the already known multi-decade low of around 0.95. 

This analysis is based on a daily chart. In order to define the targets of the bulls and bears more precisely, a Fibonacci analysis would be necessary. The respective Fibonacci retracements and Fibonacci projections can be generated using the web-based trading platform “ ActivTrader ” and could then be used to derive the targets for the top and bottom.

The price trend for a daily analysis should lead from the low of November 22, 2024 of 1.03315 to the intermediate high of December 6, 2024 of 1.06291. The next resistance and support levels can be derived from this price trend. The resistance levels would be at the levels of 1.004452 (0.618%), 1.04803 (0.50%), 1.05154 (0.382%), 1.05589 (0.236%) and 1.06291 (0.00%).

The supports would be at the levels of 1.04017 (0.764%) and 1.03315 (1.00%), as well as the projections to the downside of 1.02613 (1.236%), 1.02178 (1.382%) and 1.01476 (1.618%). The three EMAs ( EMA50 in purple, EMA100 in blue and EMA200 in red ) were also added to the chart.

On the upside, a return to the area at the 0.236 percent Fibonacci mark of 1.05589 would be possible - the EMA5 was also hovering around this mark at the time of this analysis. On the downside, a test of the 1.618 percent Fibonacci projection of 1.01476 would be possible. The Relative Strength Index (RSI) was still in the neutral area at 40.56 points at the time of this analysis.

Source: ActivTrader

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