EUR/USD has been on a downward trend, reaching a new annual low near 1.0500 as the US Dollar continues to rally after Republicans secure control of both houses in the US. The election results have boosted expectations of an interest rate hike in December, leading to a decline in the Euro against the Dollar. Investors are now waiting for Fed Chair Jerome Powell’s speech on Thursday for further guidance on interest rates.
The US inflation accelerated in October, prompting speculation of a December interest rate cut. The US Dollar Index has climbed to near 106.80, its highest level since November 1, 2023. With the possibility of lower taxes and high import tariffs under Trump’s presidency, the US Dollar is expected to remain strong, limiting the potential for interest rate cuts by the Federal Reserve.
Investors are keen on Powell’s commentary on December’s monetary policy decision and the impact of Trump’s policies. Additionally, economic data such as the US Initial Jobless Claims and Producer Price Index for October will influence market sentiment. The Euro has been under pressure following Trump’s victory and the collapse of the German government, with expectations of a significant dent in the Eurozone’s export sector.
Big banks anticipate a drop in the Euro to parity with the Dollar, depending on the extent of tariffs and tax cuts. The European Central Bank is expected to further cut interest rates due to controlled inflation. Technical analysis shows a bearish outlook for EUR/USD, with short to long-term EMAs declining, and the RSI dropping to around 30.00. The pair is likely to find support near 1.0450 while facing resistance at 1.0700.
Jerome Powell, the Chair of the Federal Reserve, is scheduled to speak on Thursday, providing insights into the central bank’s future policies. Powell, who assumed the role in 2018, will address the recent economic developments and the Fed’s approach towards interest rates. Investors will closely monitor his speech for any clues on the Fed’s upcoming decisions.
