Current trend

The EUR/USD pair has lost almost 3.5% and is trading around 1.0545 after the victory of the Republican Party representative, Donald Trump, in the US presidential election. In his election campaign, he repeatedly stated the need to introduce additional import tariffs that could reach 10.0% for the EU, which is one of the key trading partners of the United States, which could negatively affect the bloc’s economy.

The second reason for the weakening of the euro is a possible adjustment of the US monetary policy in connection with the new political realities. Last week, US Fed Chairman Jerome Powell moderated expectations regarding the imminent reduction of interest rates, emphasizing the stability of the economy, the strong labor market, and the ongoing inflationary pressure, and said that there are no signals yet that there is a need to rush to adjust monetary policy. As a result, according to the Chicago Mercantile Exchange (CME) FedWatch instrument, the probability of a 25 basis point interest rate cut has decreased from 65.3% to 61.9%. The probability of keeping the rate at 4.75% is 38.1% 38.1%, confirming the potential for strengthening the downward movement of the EUR/USD pair.

The instrument may be supported by the EU Q3 data on the gross domestic product (GDP), amounting to 0.9% YoY, which coincided with the analysts’ forecast and was equal to the previous value. The region’s economy is slowly recovering, and after reaching zero values ​​in December 2023 and January 2024, the indicator began to grow. If this trend continues, the euro may receive an impetus to strengthen and correct to the recent fall around 1.0670–1.0825.

Support and resistance

The long-term trend changed to a downward one in November after breaking through the key trend support level of 1.0670 and reaching the support level of 1.0505. If the price continues to trade above it, an upward correction may develop, with the targets of 1.0670 and 1.0825, and in the event of a breakdown of the 1.0505 level downwards, an update of the 2023 low of 1.0460 is likely.

The medium-term trend is downward, and within its framework, the asset overcame zone 3 (1.0662–1.0642) last week and headed towards zone 4 (1.0478–1.0459). In case of correction, short positions from the trend resistance area of ​​1.0698–1.0680 with the target at the low of last week of 1.0496 are relevant.

Resistance levels: 1.0670, 1.0825, 1.0937.

Support levels: 1.0505, 1.0460, 1.0290.

Trading tips

Long positions may be opened above level 1.0565, with the target at 1.0670 and stop loss of 1.0522. Implementation period: 9–12 days.

Short positions may be opened below 1.0460, with the target at 1.0290 and stop loss 1.0511.