EUR Euro - Euro Tensions Await, Watching Trump's Inauguration

Over the past few weeks, the U.S. dollar surged as U.S. bond yields rose, reflecting expectations that Trump's policies might stimulate inflation in the already strong U.S. economy. However, last Wednesday, the U.S. announced soft core inflation data, coupled with Federal Reserve Governor Waller's statement on Thursday that if the data supported it, there could still be three to four rate cuts this year, leading to a generally weak dollar. Currently, the currency markets anticipate a 40 basis point rate cut in the U.S. in 2025. With Federal Reserve officials entering a quiet period, there are hardly any significant U.S. economic data releases this week, and the focus will be on the beginning of President Trump's term and his potential impact on the markets. Investors are now eagerly awaiting Trump's inauguration speech on Monday to better understand his policy actions.

The EU statistics office announced last Friday that the Eurozone's December Harmonized Index of Consumer Prices (HICP) rose by 2.4% from the same period last year, up by 0.4% from the previous month. Both figures were in line with expectations. Additionally, ECB Governing Council member Nagel stated that the central bank should not rush to cut rates as inflation remains relatively high and uncertainty is significant. However, ECB Governing Council member Stournaras suggested that due to the potential further protectionist measures the U.S. might take, which could harm the Eurozone's modest growth, the central bank should continue its accommodative monetary policy and implement a series of rate cuts in the near future.

The Euro against the U.S. dollar fell to a low of 1.0176 in November 2022 last Monday but has since rebounded, hovering around the 1.03 level. Based on technical charts, the focus remains on the 1.02 level, with exchange rates holding steady around this area last Friday. After bouncing back from this level on January 2, a clear breach below is expected to lead to a new downward wave. Immediate support is likely around 1.01. Furthermore, considering a rebound of approximately 210 points since the beginning of the year, the technical downside could extend to 1.0010 and then potentially target the 0.98 level. Key upward points to watch include the descending trendline currently at the 1.0360 level, overlapping with the 25-day moving average position. A break above this area would suggest signs of a Euro rebound, with significant resistance at 1.05 and 1.0630.

Forecast range:
Resistance: 1.0360* - 1.0500 - 1.0630
Support: 1.0200 - 1.0100 - 1.0000* - 0.9800

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