Created on December 03, 2024

• As we predicted, the EUR/USD’s resilience wouldn’t last long.
• At the beginning of this crucial trading week, the currency pair attempted to surpass its recent gains of 1.0571, but with the continued pressure on the Euro due to political and economic factors, as well as the strength of the US dollar as a safe haven amidst Trump’s trade policies, the EUR/USD plummeted below the 1.0500 support level at the beginning of trading on Tuesday.

Also, this is in addition to the strength of the US Dollar from the demand for it as a safe haven in light of Trump’s trade. The Euro/US Dollar price has collapsed again to below the support level of 1.0500 at the beginning of trading on Tuesday.

Why Did the EUR/USD Fail to Sustain Its Gains?

According to reliable trading platforms, the Euro was striving to extend its recent recovery against the US dollar, but the threats of tariffs by the Trump administration, particularly the recent threat to impose tariffs on BRICS countries if they were to abandon the US dollar, hindered its efforts. Additionally, investor sentiment towards the Euro weakened due to political concerns in both France and Germany.

The US Dollar is Poised for Stronger Gains

The US dollar’s performance against other major currencies has been stronger, with increased demand for the US dollar as a safe haven. This followed Trump’s statement that he would impose a 100% tariff on any BRICS country seeking to move away from the US dollar with the aim of creating a BRICS currency. Trump stated, “The idea that the BRICS countries are trying to move away from the US dollar while we stand idly by and watch is over. We are demanding that these countries commit to not creating a new BRICS currency or supporting any other currency to replace the strong US dollar, or they will face 100% tariffs.”

The US dollar’s gains were boosted by several factors: 1) the weakening of non-dollar currencies and 2) increased likelihood of higher US inflation, which would require more restrictive interest rates from the US Federal Reserve, thereby supporting the US dollar.

The French and German Economies Under Scrutiny

Investor sentiment towards the Euro currency has deteriorated with recent developments in France and earlier in Germany. Meanwhile, recent news reported that the French Finance Minister stated that his government would not accept artificial deadlines for the budget from the National Rally. Also, the National Rally is a major party that Prime Minister Michel Barnier needs if he is to pass his budget. Overall, French politics seem to be playing a lagging role in the foreign exchange market, driving some of the Euro’s weak performance. Therefore, the apparent stalemate makes a vote of no confidence in the Barnier government highly likely, increasing the likelihood of a rise in French government bonds.

European developments are reflected in the decline of the Euro/US dollar pair on the charts, with expectations of further declines for the most traded currency pair in the foreign exchange market.

EUR/USD Analysis Today:

Recently, the EUR/USD pair seemed to be holding above the 1.04 support level, with increasing chances of a new attempt to regain the 1.06 level. However, the rise did not gain enough momentum to shift some technical indicators to a more positive zone; the pair remains below any moving averages worth watching. The Relative Strength Index (RSI) is at 39 and has turned lower again, indicating that upward momentum has faded and the downside has become more attractive. However, it may be too early to say that the EUR/USD pair will break new low levels.

First, we are approaching the “peak pessimism” point for the Euro, which is under pressure, with abundant interest rate cuts by the European Central Bank and weak growth dynamics that have already been priced in. At the same time, the strength of the US economy is reflected in expectations of reduced interest rate cuts by the US Federal Reserve, which will struggle to move much further. Thus, the US dollar may come under pressure if US jobs data this week disappoints.

EUR/USD Trading Signals:

Do not change our trading signals to sell the euro dollar from each rising level, taking into account not to risk and activating profit and stop loss orders to ensure the safety of your trading account from any sudden price reversals. 

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