EUR/USD dips as investors await Fed guidance and US inflation data
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The EUR/USD is on the defensive as it trades near a four-month low around 1.0700. The pair faces pressure from a stronger US Dollar (USD), bolstered by Trump's election win and looming trade policies, while investors await key insights from the Federal Reserve (Fed) speakers and upcoming US inflation data. Trump’s tariff-driven policies are anticipated to strain Eurozone exports, further weighing on the Euro (EUR).
EUR/USD: Impact of Trump’s Policies and Fed’s Next Move
The US Dollar’s outlook has strengthened following the recent election, with President-elect Donald Trump’s pro-tariff, low-tax agenda setting an inflationary tone that may ultimately drive up US debt levels. With Trump’s economic policies aiming to increase import tariffs and decrease taxes, the USD is set for higher demand, putting additional pressure on the EUR/USD pair.
Recent polls highlight that the public foresees a rising national debt, with expectations that Trump's proposed tax cuts could add approximately $7.5 trillion over the coming decade. Investors are now turning their attention to a series of Fed speakers this week, with markets assessing the probability of a second consecutive 25 basis point rate cut in December. The FedWatch tool places this likelihood at 65%, with traders closely monitoring Fed officials’ comments for rate direction.
Upcoming US Inflation Data and Its Market Impact
Later this week, the US Consumer Price Index (CPI) for October will be released, providing crucial data for the Fed’s rate outlook. Despite Fed officials expressing confidence in inflation’s gradual approach towards their target, any substantial deviation in the CPI reading could influence market expectations. Currently, the disinflation trend aligns with the Fed’s 2% goal, but a marked shift could disrupt this outlook and affect the USD.
EUR/USD Under Pressure as Eurozone’s Outlook Remains Uncertain
The Euro is bearing the brunt of Trump’s protectionist agenda, which threatens the region’s export-reliant economy. His stance on European trade — expecting the EU to absorb more American exports — has raised concerns over a potential trade war. European economic leaders have signaled heightened urgency in response, with former ECB President Mario Draghi underlining these concerns during the recent EU Summit. Domestic challenges within the Eurozone also cast a shadow over the EUR’s performance. For instance, Germany, the region’s economic anchor, narrowly avoided a technical recession in Q3 with a modest 0.2% growth. Political instability in Germany could stifle necessary government spending, compounding economic difficulties in the Eurozone. Investors will also be watching the European Central Bank (ECB) for its upcoming rate decision in December. While a rate cut is not confirmed, policymakers like Austria's Robert Holzmann suggest it remains an option, contingent on forthcoming economic data.
Technical Analysis: EUR/USD Downward Pressure Persists
From a technical perspective, EUR/USD is struggling to regain its footing near the 1.0700 level. The bearish momentum is confirmed by the descending 20-day and 50-day EMAs, positioned at 1.0840 and 1.0910, respectively. The 14-day RSI hovers around 40.00; a decline below this level could signal an increase in selling pressure. The upward-sloping trendline at 1.0800, originating from the April low of around 1.0600, serves as a critical resistance point. Should the EUR/USD fail to reclaim this level, the pair is likely to test the YTD low of 1.0600, presenting a pivotal support area for Euro bulls.
EUR/USD: Impact of Trump’s Policies and Fed’s Next Move
The US Dollar’s outlook has strengthened following the recent election, with President-elect Donald Trump’s pro-tariff, low-tax agenda setting an inflationary tone that may ultimately drive up US debt levels. With Trump’s economic policies aiming to increase import tariffs and decrease taxes, the USD is set for higher demand, putting additional pressure on the EUR/USD pair.
Recent polls highlight that the public foresees a rising national debt, with expectations that Trump's proposed tax cuts could add approximately $7.5 trillion over the coming decade. Investors are now turning their attention to a series of Fed speakers this week, with markets assessing the probability of a second consecutive 25 basis point rate cut in December. The FedWatch tool places this likelihood at 65%, with traders closely monitoring Fed officials’ comments for rate direction.
Upcoming US Inflation Data and Its Market Impact
Later this week, the US Consumer Price Index (CPI) for October will be released, providing crucial data for the Fed’s rate outlook. Despite Fed officials expressing confidence in inflation’s gradual approach towards their target, any substantial deviation in the CPI reading could influence market expectations. Currently, the disinflation trend aligns with the Fed’s 2% goal, but a marked shift could disrupt this outlook and affect the USD.
EUR/USD Under Pressure as Eurozone’s Outlook Remains Uncertain
The Euro is bearing the brunt of Trump’s protectionist agenda, which threatens the region’s export-reliant economy. His stance on European trade — expecting the EU to absorb more American exports — has raised concerns over a potential trade war. European economic leaders have signaled heightened urgency in response, with former ECB President Mario Draghi underlining these concerns during the recent EU Summit. Domestic challenges within the Eurozone also cast a shadow over the EUR’s performance. For instance, Germany, the region’s economic anchor, narrowly avoided a technical recession in Q3 with a modest 0.2% growth. Political instability in Germany could stifle necessary government spending, compounding economic difficulties in the Eurozone. Investors will also be watching the European Central Bank (ECB) for its upcoming rate decision in December. While a rate cut is not confirmed, policymakers like Austria's Robert Holzmann suggest it remains an option, contingent on forthcoming economic data.
Technical Analysis: EUR/USD Downward Pressure Persists
From a technical perspective, EUR/USD is struggling to regain its footing near the 1.0700 level. The bearish momentum is confirmed by the descending 20-day and 50-day EMAs, positioned at 1.0840 and 1.0910, respectively. The 14-day RSI hovers around 40.00; a decline below this level could signal an increase in selling pressure. The upward-sloping trendline at 1.0800, originating from the April low of around 1.0600, serves as a critical resistance point. Should the EUR/USD fail to reclaim this level, the pair is likely to test the YTD low of 1.0600, presenting a pivotal support area for Euro bulls.