Bearish View
- Sell the EUR/USD pair and set a take profit at 1.0200.
- Add a stop-loss at 1.0400.
- Time frame: 1-2 days.
Bullish View
- Place a buy-stop at 1.0330 and a take-profit at 1.0410.
- Add a stop-loss at 1.0200.
The EUR/USD pair continued its strong downtrend, falling for five consecutive weeks and hitting its lowest level since November 2022. It is down nearly 10% from its August 2024 high.
The rise in the US dollar index
The EUR/USD pair fell as the US dollar index continued its strong rise. After falling to $100 in 2024, it surged to over $109 last week as investors flocked to the safe-haven currency.
The main reason for this collapse is that there is a difference between the United States and the European Union. Recent economic data shows that the European Union grew by 0.4% in the third quarter and by 1% compared to Q3’23. Key countries like Germany and France are no longer growing.
The United States, on the other hand, is doing well. Analysts expect the economy to grow by 2.7% in 2024. The stock market is booming, with eight companies having market capitalizations over $1 trillion.
Therefore, analysts expect the Federal Reserve and the European Central Bank (ECB) to diverge. The Fed has indicated that it will make two interest rate cuts this year, while the ECB will make more cuts this year.
The EUR/USD pair also fell as the market awaits the upcoming inauguration of Donald Trump. Trump has threatened to impose massive tariffs on European goods until the bloc buys more American oil and gas.
The next key catalyst to watch on Monday will be services and composite PMI data from Europe and the United States. Economists see data showing that Germany’s composite PMI fell to 47.8, while Europe’s PMI rose slightly to 49.5. A PMI number below 50 is usually a sign that the sector is contracting. In the US, the PMI is expected to be 56.
Technical analysis of EUR/USD
The EUR/USD pair has been in a strong downtrend over the past few months as the US dollar index has rallied. It moved below the key support at 1.0450, the psychological level and October 2023 low.
The pair also fell below the key support at 1.0333, the low of November 2022. It moved below the Ichimoku cloud indicator and to the ultimate support of the Murrey Math Lines.
Therefore, the EUR/USD exchange rate is likely to continue to fall as traders target the parity level at 1,000, which coincides with the extreme oversold point of the Murray Mathematical Lines.
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