The recent weakness of the euro against the US dollar is causing nervousness among traders. The EUR/USD exchange rate has come under significant pressure in recent weeks and is dangerously approaching the psychologically important level of 1.05.
Trump's election victory as a catalyst
Donald Trump's surprise victory in the US presidential election has given the dollar a new boost. Investors are already discounting possible tariffs, tax cuts and deregulation, which strengthens the greenback. The euro then fell to an annual low of USD 1.04.
Trade conflict weighs on the eurozone
the prospect of new trade tensions between the USA and Europe worries the markets. Trump's protectionist rhetoric and the threat of punitive tariffs are weighing particularly heavily on the export-oriented eurozone. Germany, as the largest economy in the currency area, is particularly exposed here.
Divergent monetary policy
While the Federal Reserve is taking a more hawkish stance, the ECB remains rather dovish. This monetary policy divergence is providing additional support for the dollar. Market participants have significantly reduced their expectations of interest rate cuts by the Fed.
Outlook remains bearish
In the short term, there is little potential for a euro recovery. In the medium term, a rise to the previous high of 1.12 by the end of 2025 is possible from a technical analysis point of view, but the immediate trend remains downward. A break below the 1.05 mark could trigger further technical selling. Close monitoring of political developments and macroeconomic data remains essential. The upcoming global PMIs and the interest rate decision of the Chinese central bank could provide additional volatility.
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