EUR/USD: Trump-Fueled US Dollar Strength Could Pave Way for New Lows Below 1.06
2024.11.12 05:54
- EUR/USD faces downward pressure with a break below 1.06 potentially signaling new lows for the year.
- US inflation data could provide the US dollar with more momentum, weighing on the euro.
- Key support levels at 1.06 and 1.05 are in focus for EUR/USD traders as political and economic factors play out.
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After a brief rebound last week, the is now facing downward pressure, with a break below the key 1.06 level likely pushing the pair to fresh lows for the year.
This trend could gain momentum, particularly with Wednesday’s US data in the spotlight.
Market consensus suggests inflation will remain steady from October, both for consumer and metrics, potentially giving the an added boost and consequently weakening the euro.
Why the US Dollar Is Gaining Ground
The surge in the US dollar is largely driven by the anticipation of President-elect Trump’s economic policies. If his campaign promises materialize, tariffs could become a significant part of the US economic agenda.
In a worst-case scenario, the US could impose 60% tariffs on Chinese goods and at least 10% on other imports.
This would likely spike inflation in the short term—up to 2 percentage points—and push annual price growth to 3.6% over the next two years, according to Rabobank’s estimates.
Such inflationary pressure could prompt the to slow its pace of interest rate cuts, further strengthening the dollar.
If inflation comes in below expectations, the EUR/USD could find support at 1.06 or possibly 1.05, marking a crucial level for the pair.
The Market Is Watching the Senate and House of Representatives
The full impact of Trump’s policies, however, will depend on the balance of power in the US Congress. Republicans hold a majority in the Senate, but the House of Representatives is still up for grabs.
As of now, Republicans lead with 214 seats, compared to 204 for the Democrats. A majority of 218 is needed, so traders will be closely watching the outcome in the coming days, as it could significantly influence market sentiment.
EUR/USD: Eyes on Key Support Levels
EUR/USD has been in a strong downtrend recently, with the pair edging closer to the 1.06 support zone.
If this level breaks, the next major target for the pair is 1.05, where last year’s lows reside. If the Republicans clinch the House majority and inflation data underwhelms, we could see the pair testing this level by the end of the month.
In short, EUR/USD traders should keep an eye on the upcoming inflation data, the political landscape in the US, and potential technical breakdowns. These factors could set the stage for further US dollar strength.
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Disclaimer: This article is for informational purposes only. It is not intended as a solicitation, offer, advice, or recommendation to purchase any asset. All investments should be evaluated from multiple perspectives, and it is important to remember that any investment decision and the associated risks are the sole responsibility of the investor. Additionally, no investment advisory services are provided.
