EUR/USD Weekly Forecast: No Light at the End of the Tunnel

The Euro is under siege, and the outlook remains grim. As EUR/USD slides to two-year lows near 1.0330, the fundamental and technical backdrop suggests further downside.

Geopolitical pressures, a resurgent US Dollar, and a faltering European economy create a perfect storm for the single currency. Traders should prepare for what may be a swift return to parity.

Key Highlights This Week

1. EUR/USD at Two-Year Lows:The pair continues its fourth-quarter downtrend, losing 8% since late September. The relentless rise of the US Dollar and worsening Eurozone conditions add to the pressure.

2. Why Parity is Back on the Table:

   • The Russia-Ukraine conflict and Europe's energy insecurity.

   • Weak German economic indicators, compounded by political instability.

   • A hawkish Federal Reserve contrasted with a dovish European Central Bank (ECB).

3. The Dollar's Domination:The US Dollar Index (DXY) surged above 108.00, buoyed by safe-haven flows and speculation around U.S. fiscal and monetary policy shifts in 2025.

Tech Analysis: EUR/USD

• Key Levels:

  • Support: 1.0330 (2024 low), 1.0290, and 1.0220.

  • Resistance: 1.0606 (weekly high) and 1.0857 (200-day SMA).

• Indicators:

  • RSI signals extreme oversold conditions at 16, hinting at the possibility of temporary corrections.

  • ADX at 49 underscores a strong bearish trend.

What’s Driving This Move?

1. Diverging Monetary Policies:

   • Federal Reserve: While the Fed recently cut rates, it maintains a cautious tone, signaling restraint in further easing.

   • European Central Bank: The ECB faces limited options, with markets pricing in more aggressive rate cuts than the Fed in the coming year.

2. Geopolitical Pressures:Continued instability in Eastern Europe undermines confidence in the Eurozone economy, while the U.S. gains from its safe-haven status.

3. Economic Indicators to Watch:

   • Flash inflation data for the Eurozone (Nov 29).

   • U.S. labor market reports and consumer confidence updates.

     
     

Trading Plan for EUR/USD

• Action: 🔴 Sell

• Entry Point: 1.0450

• Stop Loss: ⛔ 1.0520

• Take Profit: 🎯 1.0300

• Timeframe: ⏳ 2-5 days

Rationale: With the Eurozone struggling and the USD retaining its bullish momentum, a bearish trade aligns with both technical and fundamental indicators.

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