EUR/USD: The pair begins 2025 as it ended 2024

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Market psychology remains the same on the Euro/Dollar currency pair, the greenback being favored by the offensive tone adopted by the Fed at the end of the last FOMC of the year, and the Euro being penalized by the political instability in France and Germany, and by less resilient economic health.

As a reminder, this meeting of the Fed Monetary Policy Committee ended unsurprisingly on 12/19 with a 25 basis point reduction in the remuneration of the Fed Funds.

But the powerful central bank also published an update of its economic projections, highlighting the great strength of the labor market. The Fed suggests that it could only lower rates by 50 basis points cumulatively over the whole of next year.

The Fed has therefore adopted a rather offensive tone, particularly due to the still chronic tensions on the job market. Like every quarter, it published a document eagerly awaited by the markets: the famous dot plots. This dot plot shows that Fed members’ median expectation for 2025 incorporates only 50 basis points (0.5 percentage points) of policy rate cuts. However, in previous dot plots, in September, members anticipated a rate cut of 100 basis points over 2025.

It is therefore a decoupling that will take place between policies and therefore monetary trajectories on both sides of the Atlantic. “While two weeks ago, without saying a word, the ECB had undertaken a “dovish” turn during its last monetary policy meeting of the year by indicating that restrictive key rates were no longer necessary, members of the Fed seem, for their part, to follow a completely different path For those who were waiting for a Christmas gift from Jerome Powell, we will therefore have to go back…” summarized Thomas Giudici, head of bond management at Auris Gestion. .

A decoupling further illustrated today by the publication of the final data from the PMI barometers of activity in industry in the Euro Zone, confirmed at almost 5 points below the 50 point mark, at 45.1, which gives an idea of ​​contraction, particularly due to German structural difficulties. “Despite the approach of the end-of-year holidays, the situation remained gloomy in the manufacturing sector of the euro zone. Unsurprisingly, the trends were downward in December. The decline in new orders was even accentuated by compared to October and November, leading in turn to an acceleration in the decline in work in progress and thus destroying any hope of an imminent resumption of activity”, coldly notes Dr. Cyrus de la Rubia, Chief Economist at the Hamburg Commercial Bank .

To be monitored at 2:30 p.m. the level of weekly registrations for unemployment benefits in the United States, a way of measuring the great shape of the job market across the Atlantic. A fact to which the Fed is particularly sensitive.

At midday on the foreign exchange market, the Euro was trading against $1.0320 approximately.

KEY GRAPHIC ELEMENTS

The post FOMC stall has given way to the formation of a wedge, between the lower limit of the Bollinger bands and the 20-day moving average (in dark blue), an increasingly valuable benchmark.

MEDIUM TERM FORECAST

Considering the key graphical factors that we have mentioned, our opinion is negative in the medium term on the Euro/Dollar parity.

Our entry point is at $1.0317. The price target for our bearish scenario is $1.0001. To preserve the invested capital, we advise you to position a protective stop at $1.0451.

DAILY DATA CHART