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The EUR/USD currency pair continued its downtrend on Tuesday, which started on December 6. While the decline has been slow, the downward trend remains intact across all timeframes. As such, the pace of the euro's depreciation makes little difference. We previously noted that a second drop was likely after the first drop to the 1.0350 level. Following a minor correction, the price resumed its downward trajectory, confirming that the bearish trend was not over. Our stance remains unchanged: the euro is likely to continue falling.
The euro closed 2024 at its lowest level in nearly two years. The end of the year did not deter the bears. Despite a "thin market" and the complete absence of fundamental and macroeconomic drivers, sellers pushed the pair lower. While volatility declined during the holiday weeks, we repeatedly warned that holidays do not guarantee price stagnation. While the pair occasionally stayed flat on certain days, it was not a consistent occurrence.
The situation may shift after January 20, just as it changed after September 18—a pattern we have highlighted multiple times. There is no evident catalyst for a sharp rise in the euro or even a pause in its decline. However, the fundamental backdrop could shift after Trump officially becomes the U.S. President. It remains uncertain what actions Trump might take on the international stage and when. The market appears to be recalibrating the EUR/USD exchange rate after its expectations for a dovish Federal Reserve were unmet.
We maintain that parity is the minimum target for the euro—a prediction we first made at the start of 2024. With only 350 pips separating the current level from parity and given the euro's continued fall even during the end-of-year period, achieving this target seems feasible, possibly as early as January 2025. At this point, the euro faces no positive outlook.
The average volatility of the EUR/USD pair over the past five trading days is 51 pips, which is considered "average." We anticipate that the pair will trade within the range of 1.0303 to 1.0405 on Thursday. The higher linear regression channel points downward, suggesting that the global bearish trend is ongoing. The CCI indicator has reentered oversold territory due to another decline, signaling a potential correction at most.
The EUR/USD pair may continue its downward trend, which has been ongoing recently. For several months, we have consistently expressed our expectation for the euro to decline in the medium term. We strongly support the current bearish direction, which we believe is far from over. There is a significant likelihood that the market has already priced in all anticipated future rate cuts from the Federal Reserve. As a result, the dollar lacks reasons for a medium-term downturn. Short positions remain relevant, with targets at 1.0303 and 1.0254, as long as the price stays below the moving average. If you're trading using "pure" technical analysis, you could consider long positions when the price is above the moving average, targeting 1.0620. However, current price movements are weak, and any upward action is likely to be seen as a correction.
Linear Regression Channels help determine the current trend. If both channels are aligned, it indicates a strong trend.
Moving Average Line (settings: 20,0, smoothed) defines the short-term trend and indicates the direction in which trading should align.
Murray Levels represent target levels for movements and corrections.
Volatility Levels (red lines) indicate the probable price channel the pair is likely to trade over the next day based on current volatility metrics.
CCI Indicator: If it enters the oversold area (below -250) or overbought area (above +250), it signals a potential trend reversal in the opposite direction.
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