EUR/USD Forecast

The EUR/USD pair has recently been on a bearish trajectory, with multiple economic and geopolitical factors pointing to continued downward pressure over the coming months. As inflation concerns ease, central banks have made dovish rate decisions and softening U.S. jobs data influences the bearish sentiment for this pair. Forex traders are now closely watching for signals on how to capitalize on the pair’s declining exchange rate. 

This EUR/USD forecast summarizes Benzinga’s technical and fundamental analysis for the currency pair, highlighting key support and resistance levels and potential influences from upcoming economic indicators and events. With a generally bearish outlook and more losses expected for EUR/USD, understanding these dynamics can present strategic opportunities for forex traders following this trend. Read on for our in-depth market forecast, providing actionable insights into trading the EUR/USD currency pair.

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Current Market Analysis

The EUR/USD currency pair has experienced a notable decline recently. Some of the key factors influencing the forex market’s bearish move in this currency pair include:

• Economic Data: Recent economic indicators from both the eurozone and the United States have significantly influenced the EUR/USD exchange rate. For instance, market participants have closely watched Germany's ZEW survey and the U.S. Federal Reserve's policy decisions.
• Central Bank Policies: The Federal Reserve recently announced a 25 basis point cut in the Fed Funds Rate, bringing it down to 4.50%-4.75%. This decision was widely expected, influenced by the Fed's assessment that inflation is increasing closer to its 2% target, while the U.S. labor market has shown signs of easing. In the eurozone, expectations have increased for further ECB rate cuts.
• Geopolitical Events: Donald Trump’s recent election victory as President of the United States has also impacted the EUR/USD exchange rate, with the dollar strengthening in response to anticipated policies under the Trump administration, including potential trade tariffs.

These factors contributed to recent downward pressure on the EUR/USD pair, with the exchange rate hitting fresh lows below the 1.0600 psychological support point. 

Technical Analysis

The EUR/USD pair is in a bearish trend, with key support levels at 1.0595/1.0602, 1.0484, 1.0449 and 1.0294. Resistance levels are noted at 1.0683/1.0685, 1.0762/1.0778 and 1.0936/1.0937. 

Furthermore, the 14-day Relative Strength Index (RSI) is approaching oversold levels at 32.60, while the exchange rate lies significantly below its 200-day Moving Average (MA), now sitting at 1.0867 with a negative slope. 

Overall, our technical analysis suggests that the EUR/USD may be nearing a potential short-term reversal to correct its oversold condition, but the overall medium-term trend remains bearish.

Fundamental Analysis

Let's breakdown the fundamental analysis of EUR/USD by examining recent economic indicators, political events, trade relations and other global factors to yield an overall fundamental outlook:

Economic Indicators

• GDP Growth:

Eurozone: The Eurozone's GDP growth has been relatively weak. The European Central Bank (ECB) projects that economic growth will remain subdued in the near term but should improve with rising household incomes, a resilient labor market and stronger foreign demand.

United States: The U.S. economy expanded at an annual rate of 2.8% in the third quarter of 2024, down from 3.0% in the second quarter. The GDP growth is expected to be around 2.7% for the full year of 2024.

• Inflation Rates:

Eurozone: Inflation in the eurozone has been falling. The ECB projects inflation to increase slightly in the fourth quarter of 2024 but returns to target by the end of 2025 as cost pressures ease. The EU inflation rate was 2.10% in September 2024, down from 2.40% in August 2024 and it is expected to fall further as the year progresses.

United States: The annual inflation rate for the 12 months ending September 2024 was 2.4%, down from 2.5% in August 2024. The Federal Reserve forecasts core PCE inflation to drop to 2.4% in 2024 and 2.2% in 2025.

• Interest R:

Eurozone: The ECB has been cautious with interest rates, recently cutting the Deposit Facility Rate to 3.25% and the Main Refinancing Operations Rate to 3.4%. 

United States: The Federal Reserve Bank in the U.S. has also been cutting its benchmark interest rates, with the current Fed Funds rate at 4.75% after a recent 25 basis point cut in November.

Political Events

The recent U.S. election had a significant negative impact on the EUR/USD pair, as the USD strengthened in its wake. The forex market is currently assessing the impact of Donald Trump's return as President positively. Trump's protectionist stance on trade and his promise of potential tax cuts could lead to higher inflation and interest rates, thereby boosting the USD in the long term. 

Trade Relations

Trade relations between the U.S. and its major trading partners, including the eurozone, have been tense. Newly elected U.S. President Donald Trump's harsh policies on tariffs and trade could lead to higher inflation in the U.S. and negatively impact eurozone exports, thereby strengthening the USD versus the EUR over time. 

Global Factors

Global factors such as geopolitical tensions, supply chain disruptions and economic policies in other major economies also play a role in the dynamics of the EUR/USD exchange rate. The ongoing geopolitical tensions in the Middle East and the US-China trade dispute, which seems likely to worsen given Trump’s victory, have increased risk aversion, thereby boosting the USD as a safe-haven currency versus the EUR.

Outlook

Economic indicators, political events, trade relations and global factors influence the exchange rate of the EUR/USD currency pair. The recent U.S. election and the Federal Reserve's dovish interest rate decisions are the most significant current drivers of the currency pair's movements. The Eurozone's economic recovery and inflation trends will also play a key role in the future direction of EUR/USD, which seems likely to decline over the coming months.

Forecast for the EUR/USD Pair

Overall, the EUR/USD pair is currently in a downtrend, which was strongly influenced by the 2024 U.S. election results and the Federal Reserve's decision to cut its benchmark Fed Funds rate by 25 bps in November. Going forward, the Eurozone's ongoing economic recovery and inflation trends should be monitored closely since those factors can play a major role in the future direction of EUR/USD.

Given the current bearish outlook for the EUR/USD pair following the 2024 U.S. election, here's a short and long-term forecast for the currency pair:

Short-Term Forecast

• Current Exchange Rate: Around 1.0625
• Current Direction: Bearish
• Key Support Levels: 1.0595/1.0602, 1.0484, 1.0449, 1.0294 
• Key Resistance Levels: 1.0683/95, 1.0762/78, 1.0936/37

Long-Term Forecast

• Anticipated direction: Bearish
• Potential Range: 1.0300 – 1.0750 over the next six months.

Possible Factors That Could Influence Future EUR/USD Movements

The following factors could potentially affect upcoming movements in the EUR/USD exchange rate:

Possible Bearish Factors

• U.S. Economic Strength: Strong U.S. economic data and higher interest rates could strengthen the USD versus the EUR.
• Political Uncertainty in the eurozone: Any political instability or economic challenges in the eurozone could weaken the EUR.
• Trade Tensions: Increased trade tensions between the U.S. and its trading partners could strengthen the USD.

Possible Bullish Factors

• Eurozone Economic Recovery: If the eurozone economy shows signs of stronger growth, this could boost the EUR.
• ECB Policy Changes: Any indication of tightening monetary policy by the European Central Bank could strengthen the EUR.
• U.S. Dollar Weakness: Any negative economic data or political instability in the U.S. could weaken the USD.

Capitalizing on EUR/USD’s Exchange Rate Movements

You can use Benzinga’s forecast bearish movements in the EUR/USD exchange rate by signing up with a trusted online forex broker like FOREX.com. As an industry leader, FOREX.com provides access to advanced trading tools, competitive dealing spreads and fast, reliable trade executions to help you capitalize on currency market trends and volatility. The broker’s real-time data, powerful charting options and useful risk management features empower you to implement your currency market views as you learn to trade forex and profit from current trends.