The new year has not brought good news for the EUR/USD, as the pair fell 0.8% on the first trading day of 2025. The Euro is facing bearish sentiment as it hit a nearly 26-month low at the 1.0250 level, with European Manufacturing Purchasing Managers Index (PMI) data missing the mark and the European Central Bank (ECB) signaling further rate cuts. According to ECB Governing Council member Yannis Stournaras, interest rates in the Eurozone are expected to decline steadily throughout 2025, widening the interest rate differential with the US and putting pressure on the EUR/USD pair. Analysts predict parity between the Euro and the Greenback sometime this year.
December’s Pan-European PMI survey results showed a slight decline, indicating the increasing possibility of accelerated rate cuts by the ECB to support the European economy amidst rising petrol prices. The Eurozone’s economic outlook is further complicated by these factors. In contrast, the US ISM Manufacturing PMI survey results for December are expected to remain steady at a contractionary 48.4, providing some stability in the midst of economic uncertainty.
The EUR/USD price forecast shows an 8.82% decline from September’s peak, with short-sellers struggling to break through the 1.0200 support level. A bearish divergence on the Moving Average Convergence-Divergence (MACD) indicator suggests potential further losses in the future. Euro bidders face resistance from the descending 50-day Exponential Moving Average (EMA) at 1.0550, with a possible comeback beyond that point leading to a test of the 200-day EMA at 1.0760.
The Euro, used in the Eurozone comprising 19 European Union countries, is the second most traded currency after the US Dollar, with EUR/USD being the most traded currency pair globally. The Eurozone’s reserve bank is the European Central Bank (ECB) in Frankfurt, Germany, responsible for setting interest rates and managing monetary policy. Eurozone inflation data, economic indicators such as GDP, Manufacturing PMIs, and Trade Balance all play a role in determining the strength of the Euro and can impact its value in the foreign exchange markets.
In conclusion, the Euro is facing challenges in the new year due to bearish sentiment, potential rate cuts by the ECB, and weakening economic data. The widening interest rate differential with the US and expectations of parity between the Euro and the Greenback are likely to keep the EUR/USD pair under pressure in 2025. Economic indicators and data releases will continue to influence the direction of the Euro, with traders closely monitoring developments in the Eurozone and the global economy to make informed decisions in the foreign exchange markets.
