The EUR/USD currency pair faces significant selling pressure near the key resistance level of 1.0800 as the US Dollar resumes its upside trend. This follows the victory of Donald Trump in the US Presidential election, which has improved the US Dollar’s long-term outlook. The Euro is facing challenges due to threats of Trump tariffs, German political uncertainty, and doubts over the economic outlook of the Eurozone.
The US Dollar Index (DXY) has bounced back to nearly 104.70 after a sharp correction to 104.20 on Thursday. Trump’s victory has led to expectations of higher import tariffs and lower corporate taxes, which could lead to higher investment, spending, and labor demand. This could elevate inflation risks and force the Federal Reserve to adopt a restrictive monetary policy stance.
Market experts suggest that Trump’s fiscal policy, if implemented, could lead to higher inflation and prompt the Fed to continue with its policy-easing cycle. Federal Reserve Chair Jerome Powell expressed optimism about inflation remaining on track to the bank’s 2% target despite some softness in the labor market conditions.
The Euro is also facing pressure due to its underperformance against major currencies, except for those in the Asia-Pacific region. Investors are concerned about the Eurozone economic outlook following Trump’s victory, the collapse of Germany’s coalition government, and risks of inflation remaining below the ECB’s 2% target.
The collapse of the German coalition government has paved the way for snap elections in early 2025, leading to political uncertainty that could limit economic growth due to postponed fiscal spending. The threat of higher tariffs by the US could strain the Eurozone’s export sector, impacting economic growth. Analysts predict that the ECB’s Deposit Facility rate could fall to 1.5% from the previously projected 2.25% due to weakening macroeconomic conditions.
In technical analysis, EUR/USD has resumed its decline after a brief recovery to near 1.0800 in the European session. The near-term trend remains bearish as the 20-day and 50-day EMAs continue to decline. The RSI hovers near 40.00, with a potential bearish momentum if it slides below this level. The shared currency pair could decline to the year-to-date low of 1.0600, with the upward-sloping trendline from April 16 acting as a key resistance zone for Euro bulls around 1.0800.
In conclusion, the EUR/USD currency pair is facing selling pressure near the key resistance level of 1.0800 as the US Dollar strengthens following Trump’s victory. The Euro is down amid threats of Trump tariffs, German political uncertainty, and doubts over the Eurozone economic outlook. Technical analysis shows a bearish trend for EUR/USD, with potential downside towards the year-to-date low of 1.0600. Political uncertainty and economic challenges continue to weigh on the Euro, while the US Dollar’s long-term outlook remains positive.
