Bearish View
- Sell the EUR/USD pair and set a take-profit at 1.0330.
- Add a stop-loss at 1.0600.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.0520 and a take-profit at 1.0600.
- Add a stop-loss at 1.0350.
The EUR/USD exchange rate remained on edge as concerns about the German economy continued and as traders waited for the upcoming Federal Reserve decision. The pair, which is the most liquid player in forex, was trading at 1.0500, slightly higher than last week’s low of 1.0450.
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Germany Concerns Remain
The EUR/USD pair wavered after another set of weak economic numbers from Germany, the biggest economy in Europe. According to S&P Global, the country’s manufacturing output continued falling, moving from 43 in November to 42.5 in December. The drop was lower than the median estimate of 43.1.
The same trend happened in France where the PMI fell from 43.1 to 41.9, missing the estimated 43.2. As a result, the European manufacturing PMI remained at 45.2, also lower than the expected increase of 45.3. These numbers mean that the bloc’s crucial manufacturing output was slowing down.
Worse, the biggest European countries are having a political crisis. The French government collapsed recently, while the German one failed on Monday. Therefore, Germany will go to a national election in February.
The next key EUR/USD news to watch will be the German business confidence data that comes out on Tuesday. These numbers will likely show that confidence retreated slightly in December as the economic growth deteriorated.
The US retail sales data will come out on Tuesday and provide more information about the health of the consumer. The most important event will be next week’s Federal Reserve interest rate decision that will set the tone on what to expect in 2025.
Economists expect the Fed to cut rates by 0.25% because of the deteriorating labor market, with the unemployment rate rising to 4.2% in November.
EUR/USD Technical Analysis
The EUR/USD exchange rate has been in a downward trend as concerns about the European continued. It has remained below the key support level at 1.0600, its lowest point in April this year.
The pair has also found support at the strong, pivot, reverse level at 1.0500. It has also moved below the 50-day and 25-day Exponential Moving Averages. Also, it retested the crucial resistance level at 1.0600, in what is known as a break and retest pattern.
Therefore, the pair will likely continue falling as sellers target the next support at 1.0330, its lowest point this year.
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