EUR/USD plummets to two-year low amid dollar strength
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The euro continues to weaken, falling to its lowest level in over two years against the US dollar. This decline follows robust US labor market data and growing divergence between economic outlooks in the eurozone and the United States.
A shift in momentum following strong US jobs data
Last Friday, the US Bureau of Labor Statistics reported that the economy added 256,000 jobs in December, significantly surpassing the forecasted 156,000. The unexpected strength in job creation has recalibrated market expectations, reducing the likelihood of immediate Federal Reserve rate cuts.
Key drivers behind the dollar rally
Hawkish Federal Reserve stance
The strong labor market report has reinforced the Fed’s cautious approach to easing monetary policy, with markets now pricing in fewer rate cuts in 2025. Higher US Treasury yields have further solidified the dollar’s position as a preferred safe-haven currency.
Pro-dollar policies from President-elect Trump
Donald Trump’s incoming administration has signaled plans for deregulation, tax cuts, and new tariffs. While these policies aim to stimulate domestic growth, they may also reignite inflationary pressures, complicating the Federal Reserve’s path to price stability. Nonetheless, these measures have bolstered demand for the dollar.
Limited prospects for Eurozone growth
The eurozone continues to face a challenging economic landscape, with sluggish growth and subdued inflation. Recent dovish commentary from European Central Bank officials has further weighed on the euro. Chief Economist Phillip Lane’s suggestion of additional easing, coupled with Olli Rehn’s remarks advocating for continued rate cuts, has diminished investor confidence in the single currency.
Technical outlook: EUR/USD under pressure
Support levels
The EUR/USD pair hovers near $1.0210, a critical level last seen in November 2022. A break below $1.0200 could pave the way for further declines, potentially targeting $1.0150.
Resistance levels
On the upside, resistance lies near $1.0300, with stronger barriers at $1.0400. Any attempt at recovery is likely to face headwinds due to persistent bearish sentiment.
Conclusion: dollar dominance continues
The EUR/USD pair is poised for further downside as the US dollar capitalizes on economic strength and hawkish monetary policy expectations. Meanwhile, the euro struggles under the weight of weak economic fundamentals and dovish ECB rhetoric. Investors should watch for upcoming US inflation data, which could provide additional clarity on the Federal Reserve’s next steps.
A shift in momentum following strong US jobs data
Last Friday, the US Bureau of Labor Statistics reported that the economy added 256,000 jobs in December, significantly surpassing the forecasted 156,000. The unexpected strength in job creation has recalibrated market expectations, reducing the likelihood of immediate Federal Reserve rate cuts.
Key drivers behind the dollar rally
Hawkish Federal Reserve stance
The strong labor market report has reinforced the Fed’s cautious approach to easing monetary policy, with markets now pricing in fewer rate cuts in 2025. Higher US Treasury yields have further solidified the dollar’s position as a preferred safe-haven currency.
Pro-dollar policies from President-elect Trump
Donald Trump’s incoming administration has signaled plans for deregulation, tax cuts, and new tariffs. While these policies aim to stimulate domestic growth, they may also reignite inflationary pressures, complicating the Federal Reserve’s path to price stability. Nonetheless, these measures have bolstered demand for the dollar.
Limited prospects for Eurozone growth
The eurozone continues to face a challenging economic landscape, with sluggish growth and subdued inflation. Recent dovish commentary from European Central Bank officials has further weighed on the euro. Chief Economist Phillip Lane’s suggestion of additional easing, coupled with Olli Rehn’s remarks advocating for continued rate cuts, has diminished investor confidence in the single currency.
Technical outlook: EUR/USD under pressure
Support levels
The EUR/USD pair hovers near $1.0210, a critical level last seen in November 2022. A break below $1.0200 could pave the way for further declines, potentially targeting $1.0150.
Resistance levels
On the upside, resistance lies near $1.0300, with stronger barriers at $1.0400. Any attempt at recovery is likely to face headwinds due to persistent bearish sentiment.
Conclusion: dollar dominance continues
The EUR/USD pair is poised for further downside as the US dollar capitalizes on economic strength and hawkish monetary policy expectations. Meanwhile, the euro struggles under the weight of weak economic fundamentals and dovish ECB rhetoric. Investors should watch for upcoming US inflation data, which could provide additional clarity on the Federal Reserve’s next steps.