Created on December 22, 2024

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The EUR/USD went into this weekend within sight of 1.04300, which may be considered a good achievement after having a hit a low around the 1.03400 mark on late Wednesday and once again Friday.

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The EUR/USD is struggling to create a sustained move higher. The same cannot be said for lower moves in the EUR/USD which have happened on a fairly steady basis since the end of September. The EUR/USD is not alone in its battle against USD centric strength which has taken hold of Forex. The GBP and JPY have equally struggled as risk adverse trading has built up power amidst a complicated shift of sentiment globally.

The EUR/USD went into this weekend near the 1.04292 level. However, this is not the main story for the EUR/USD, because the currency pair did trade around lows of nearly 1.03400 which was last seen in a sustained manner in November of 2022. Yes, the EUR/USD did trade lower in November of this year on the 22nd, when the 1.03350 vicinity was briefly seen. Yet, the current lows of the EUR/USD feel a little more sustained then the lows experienced one month ago and that is because sentiment has grown more fragile within institutional financial houses. Behavioral sentiment in the EUR/USD appears to be weaker.

Early Trump Concerns and Growing Federal Reserve Worries                                                                                                                                       

The holiday season which is now upon the financial markets may provide some relief for the EUR/USD this coming week, but there are no guarantees. Trading in Forex during the Christmas and New Year’s holiday often delivers reversals and unexplained price momentum. Then the prices tend to get reset following the return of large traders to their offices the second week of January. The past three months of trading have delivered rather dramatic price action, leaving the door open to potentially more fast trading in the coming two weeks.

While the EUR/USD has been in a bearish trend which has correlated to the broad Forex market, this doesn’t mean things will get easier to create a potential shift for bullish action in the coming month. Sentiment which was nervous in November because of President-elect Donald Trump coming into office has likely been digested, but this past week’s rhetoric from the U.S Federal Reserve has created new worries for Forex traders. It appears the Fed is going to take a more cautious approach to interest rate cuts. It is clear the Fed wants to see the effects of the Trump administration’s impact on the U.S economy over the mid-term. Higher interest rates comparably between the ECB and Fed are a problem.

EUR/USD Lows and Speculative Buying

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Traders with a bias towards the EUR regarding positive sentiment need to carefully consider their near-term thinking. The lows being tested now are important. Yes, the holiday season will see thin trading action, but the EUR/USD will certainly see moves this coming week which will be of interest.

• Now the 1.04000 level will be watched.
• If the currency pair is able to hold on to this level and above it may be a good sign, but if the ratio cannot hold back selling and values below the 1.04000 level are penetrated and sustained this could mean more weakness is expected.
• However, results being displayed in the coming days need to be treated with skepticism because Forex volumes may be incredibly thin.

EUR/USD Weekly Outlook:

Speculative price range for EUR/USD is 1.03325 to 1.04775

Arguing against the EUR/USD bearish trend which has pervaded since the end of September may prove intriguing, but it may also prove expensive. Selling of the EUR/USD has been strong. Looking for reversals higher may feel like an opportunity, but sustained buying of the currency pair doesn’t seem to have a profound amount of reasons over the near-term to actually become reality.

Traders who decide to participate in the holiday markets should look for limited moves without being overly ambitious. Volumes will be low, but Forex can still produce sudden waves of action that are fast. The price velocity in the EUR/USD have been strong and there is a potential a spike or two could be displayed this coming week.

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