As the year draws to a close, the EUR/USD currency pair is trading at approximately 1.0400, reflecting limited movement in a stagnant market. Most financial markets are either closed or set to close early for New Year’s Eve, which contributes to the lack of trading activity. The USD has emerged as the dominant currency, gaining value against its major counterparts, while the EURO has slipped around 6% against the Greenback.
The anticipated political climate surrounding a potential second term for Donald Trump has notably influenced the USD’s strength. His proposed tax and tariff policies, particularly aimed at imports from China, Canada, and Mexico, are causing apprehensions regarding inflation. This unease has led to a cautious approach from the Federal Reserve, with policymakers indicating fewer interest rate reductions in the coming year. The Fed’s hawkish stance has consequently fueled the USD’s momentum as we close out December.
Moreover, the relative performance of the U.S. economy remains stronger compared to other major economies, bolstering the appeal of the dollar. Despite Wall Street operating normally, the bond markets will close early, resulting in minimal trading activity and a focus shift toward the upcoming New Year holiday. Market participation is expected to increase significantly when trading resumes on January 2.
From a technical analysis perspective, the EUR/USD pair is exhibiting bearish characteristics. The daily chart indicates a downward trend, with a 20 Simple Moving Average (SMA) acting as dynamic resistance around the 1.0470 level. Additionally, the 100 and 200 SMAs reflect a similar downward trajectory, consistent with prevailing selling pressures. Short-term indicators have weakened but remain in negative territory, resulting in a neutral-to-bearish outlook for the pair in the near term. Key support levels are identified at 1.0370, 1.0330, and 1.0290, while resistance points are situated at 1.0440, 1.0470, and 1.0510.
