EUR/USD Price Forecast: German politics, Trump's proposed tariffs favor bearish traders
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CLAIM OFFER- EUR/USD hangs near a multi-month low and is pressured by a combination of factors.
- German political uncertainty and fears over Trump's proposed tariffs weigh on the Euro.
- Bets for less aggressive Fed rate cuts underpin the USD and exert pressure on the pair.
The EUR/USD pair drifts lower for the second straight day on Monday and slides back below the 1.0700 mark, closer to over a three-month low during the early European session. Spot prices seem vulnerable to weaken further amid the political uncertainty in Germany. In fact, German Chancellor Olaf Scholz came under increasing pressure to bring forward a vote of confidence that would pave the way for snap elections after the collapse of his governing coalition. The Free Democratic Party pulled out of the coalition last week after Scholz fired his finance minister over a budget dispute, leaving the Social Democratic Party and its other coalition partner without a majority.
Moreover, expectations that the resumption of tariffs on all US imports could strain the Eurozone’s export sector and potentially impact economic growth seem to undermine the shared currency. US President-elect Donald Trump had warned before that the European Union would have to pay a big price for not buying enough American exports and pledged to impose a universal 10% tariff on imports from all countries. Adding to this, hopes that Trump's policies would spur economic growth and boost inflation, and restrict the Federal Reserve (Fed) to ease its monetary policy more aggressively, remain supportive of the bullish sentiment surrounding the US Dollar (USD). This further validates the near-term negative outlook for the EUR/USD pair.
Minneapolis Fed President Neel Kashkari said on Sunday that the central bank wants to have confidence and needs to see more evidence that inflation will go all the way back to the 2% target before deciding on another interest rate cut. That said, the Fed last week signaled plans to ease monetary policy further, with traders still pricing in a 65% chance of another interest rate cut in December. This, in turn, might hold back the USD bulls from placing fresh bets and act as a tailwind for the EUR/USD pair ahead of this week's release of the consumer inflation figures on Wednesday. Apart from this, speeches by influential FOMC members, including Fed Chair Jerome Powell on Thursday, will drive the USD and provide a fresh impetus to the major.
Technical Outlook
From a technical perspective, the recent breakdown below the very important 200-day Simple Moving Average (SMA) and last week's failure near the 100-day SMA favor bearish traders. Moreover, negative oscillators on the daily chart suggest that the path of least resistance for the EUR/USD pair remains to the downside. Hence, a subsequent fall towards the 1.0660-1.0665 area, en route to the year-to-date low around the 1.0600 round figure, looks like a distinct possibility. Some follow-through selling should pave the way for a slide towards the 1.0540 intermediate support before spot prices eventually drop to challenge the 1.0500 psychological mark.
On the flip side, the Asian session high, around the 1.0725-1.0730 region, now seems to act as an immediate hurdle ahead of the 1.0770 area and the 1.0800 mark. A sustained strength beyond the latter might trigger a short-covering rally and lift the EUR/USD pair to the 1.0860-1.0870 region en route to the 1.0900 round figure, and the monthly peak, around the 1.0935 area touched last week. The subsequent move up should pave the way for a move towards reclaiming the 1.1000 psychological mark and could negative the near-term negative outlook.
EUR/USD daily chart
(This story was corrected on November 11 at 13:16 GMT to say that Jerome Powell's speech is on Thursday, not Friday.)
- EUR/USD hangs near a multi-month low and is pressured by a combination of factors.
- German political uncertainty and fears over Trump's proposed tariffs weigh on the Euro.
- Bets for less aggressive Fed rate cuts underpin the USD and exert pressure on the pair.
The EUR/USD pair drifts lower for the second straight day on Monday and slides back below the 1.0700 mark, closer to over a three-month low during the early European session. Spot prices seem vulnerable to weaken further amid the political uncertainty in Germany. In fact, German Chancellor Olaf Scholz came under increasing pressure to bring forward a vote of confidence that would pave the way for snap elections after the collapse of his governing coalition. The Free Democratic Party pulled out of the coalition last week after Scholz fired his finance minister over a budget dispute, leaving the Social Democratic Party and its other coalition partner without a majority.
Moreover, expectations that the resumption of tariffs on all US imports could strain the Eurozone’s export sector and potentially impact economic growth seem to undermine the shared currency. US President-elect Donald Trump had warned before that the European Union would have to pay a big price for not buying enough American exports and pledged to impose a universal 10% tariff on imports from all countries. Adding to this, hopes that Trump's policies would spur economic growth and boost inflation, and restrict the Federal Reserve (Fed) to ease its monetary policy more aggressively, remain supportive of the bullish sentiment surrounding the US Dollar (USD). This further validates the near-term negative outlook for the EUR/USD pair.
Minneapolis Fed President Neel Kashkari said on Sunday that the central bank wants to have confidence and needs to see more evidence that inflation will go all the way back to the 2% target before deciding on another interest rate cut. That said, the Fed last week signaled plans to ease monetary policy further, with traders still pricing in a 65% chance of another interest rate cut in December. This, in turn, might hold back the USD bulls from placing fresh bets and act as a tailwind for the EUR/USD pair ahead of this week's release of the consumer inflation figures on Wednesday. Apart from this, speeches by influential FOMC members, including Fed Chair Jerome Powell on Thursday, will drive the USD and provide a fresh impetus to the major.
Technical Outlook
From a technical perspective, the recent breakdown below the very important 200-day Simple Moving Average (SMA) and last week's failure near the 100-day SMA favor bearish traders. Moreover, negative oscillators on the daily chart suggest that the path of least resistance for the EUR/USD pair remains to the downside. Hence, a subsequent fall towards the 1.0660-1.0665 area, en route to the year-to-date low around the 1.0600 round figure, looks like a distinct possibility. Some follow-through selling should pave the way for a slide towards the 1.0540 intermediate support before spot prices eventually drop to challenge the 1.0500 psychological mark.
On the flip side, the Asian session high, around the 1.0725-1.0730 region, now seems to act as an immediate hurdle ahead of the 1.0770 area and the 1.0800 mark. A sustained strength beyond the latter might trigger a short-covering rally and lift the EUR/USD pair to the 1.0860-1.0870 region en route to the 1.0900 round figure, and the monthly peak, around the 1.0935 area touched last week. The subsequent move up should pave the way for a move towards reclaiming the 1.1000 psychological mark and could negative the near-term negative outlook.
EUR/USD daily chart
(This story was corrected on November 11 at 13:16 GMT to say that Jerome Powell's speech is on Thursday, not Friday.)
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