The EUR/USD pair has been heavily impacted by Donald Trump’s victory in the US presidential election, causing it to nosedive to near 1.0700, its lowest level in over four months. The US Dollar (USD) has been on the front foot following Trump’s win, with the US Dollar Index (DXY) surging to 105.30. Trump’s protectionist policies are expected to be favorable for the US Dollar while negatively impacting currencies of major trading partners such as the Eurozone, the United Kingdom, China, and Canada.
The Euro (EUR) has underperformed across the board due to concerns over Eurozone economic growth as a result of Trump’s protectionist policies. Market participants expect Trump’s tariffs to significantly damage European growth, potentially causing a €260 billion economic loss based on Europe’s estimated 2024 GDP. The European Central Bank (ECB) may respond aggressively to counter the impact of Trump’s policies, with a potential 50 bps interest rate cut in December.
Technical analysis shows that the EUR/USD pair has declined toward the key support level of 1.0700, breaking below an upward-sloping trendline around 1.0750. The 50-day Exponential Moving Average (EMA) near 1.0930 and the 14-day Relative Strength Index (RSI) below 40.00 suggest a bearish trend. The pair could decline further to the year-to-date low of 1.0600, with the round-level resistance of 1.0800 acting as a barrier for Euro bulls.
Investors are closely watching the Federal Reserve’s monetary policy decision, which is expected to include a 25-basis point interest rate cut in response to Trump’s victory. This would be the second interest rate cut in a row by the Fed, with a lower size of 25 bps compared to the 50 bps cut announced in September. Fed Chair Jerome Powell’s press conference will provide insight into the impact of Trump’s victory on the interest rate path and inflation outlook.
In conclusion, the EUR/USD pair has faced significant selling pressure following Trump’s victory, with the Euro underperforming and the US Dollar outperforming. Concerns over Eurozone economic growth have deepened due to Trump’s protectionist policies, with potential significant economic losses for Europe. Technical analysis indicates a bearish trend for the EUR/USD pair, with further declines expected towards the year-to-date low of 1.0600. Investors are eagerly awaiting the Federal Reserve’s monetary policy decision for further guidance on the impact of Trump’s victory on interest rates and inflation.
