On Thursday (January 2nd), the Euro/US Dollar (EUR/USD) continued to fluctuate at a low level, with the exchange rate currently hovering around 1.0357, up 0.03% for the day. Market sentiment remains cautious, with trading volume relatively light due to the impact of holidays. Major financial institutions have gradually resumed normal trading this week. Despite the recent strength of the US dollar and the weak performance of the euro, the market's expectations for the future trend of the euro are still full of uncertainty. With the release of US non farm payroll data next week, the euro/dollar may face more volatility.

Fundamental Trends

The monetary policy changes in the Eurozone and the United States remain the focus of current market attention. In December 2024, both the European Central Bank and the Federal Reserve announced a 0.25 percentage point reduction in their benchmark interest rates. Although this policy change has been reflected in the market, the Federal Reserve's stance appears more cautious, especially as its rhetoric on future interest rate policies has sparked market uncertainty. The recent statement by the Federal Reserve suggests that although the possibility of further interest rate cuts cannot be ruled out, the Fed's monetary policy may remain cautious due to concerns about the medium-term economic outlook.

On the contrary, the economic outlook for the eurozone remains relatively bleak, and although the European Central Bank's policy cuts have temporarily eased tensions in the eurozone, they have not effectively stimulated a rebound in the euro. Compared to the Federal Reserve's tough stance, the European Central Bank's policy is more conservative, which continues to put pressure on the euro's trading against the US dollar. The recent strong performance of the US dollar against the euro has further exacerbated this gap, causing the euro to continue to decline against the US dollar.

From a macroeconomic perspective, the low growth and high inflation pressures in the eurozone still plague the euro. Although the eurozone has entered 2025, the prospects for economic recovery remain shrouded in mystery, and the market is skeptical about whether the European Central Bank will further adopt loose policies, especially against the backdrop of slowing global economic growth.

Technical analysis

According to the latest technical analysis data, the euro against the US dollar is still in a relatively bearish market environment. Currently, the price of EUR/USD is close to 1.0357, with a relatively small intraday increase. Technically speaking, the trend of the euro against the US dollar shows some downward pressure, mainly manifested in the following aspects:

1. A balance chart displaying a bearish signal: According to the latest technical analysis report, the euro/dollar conversion line and benchmark line form a negative alignment, indicating that the market is in a bearish state. The phenomenon of negative crossing between the conversion line (Tenkan sen) and the benchmark line (Kijun sen) usually means that the exchange rate may continue to decline in the short term.

2. Weak momentum indicator: On the 14th, the Momentum Indicator showed a negative value, further confirming the pessimism of market sentiment. The sustained negative value of this indicator indicates that the euro lacks sufficient buying support against the US dollar, and the technical aspect still shows a downward trend.

3. Key technical level: From the perspective of support and resistance, around 1.04000 has become a key support level in the near future. This price level has strong stability and has received support multiple times in late November and early December, making it considered the current 'oversold area'. However, the high point of 1.0458 has created strong resistance in the short term, and if the euro rebounds to this range again, it will face significant selling pressure.

4. Potential downside risk: Based on current market sentiment and technical indicators, the euro/dollar may further decline and eventually fall below the 2024 low of 1.0332. The market sentiment is relatively weak, and the trend of the euro against the US dollar may be subject to sustained selling pressure, especially as market sentiment further cools down.

Future prospects

Entering 2025, the market trend of EUR/USD may maintain a volatile consolidation state for a relatively long period of time. Although the euro has shown some technical support, a strong rebound in the short term is still unlikely due to market uncertainty about the future US economy and Federal Reserve policies. It should be noted that after financial institutions fully resume trading, the market may enter a more active stage, and investor behavior may significantly affect the price fluctuations of the euro.

Possible future trends

1. Further downside risk: If the EUR/USD continues to be under pressure and fails to break through the support level of 1.04000, it may continue to decline and ultimately test the low point of 1.0332. With further negative market sentiment, the euro may face greater selling pressure.

2. Short term consolidation: If the euro can hold the support line of 1.04000, there may be a consolidation consolidation trend in the short term, rebounding to the range of 1.0450-1.0460. However, the upward space is still limited, and the possibility of breaking through 1.0500 is relatively small.

3. Long term view: From a long-term trend perspective, although the current performance of the euro is weak, the market's excessive optimism towards the US dollar may also lead to a weakening of its sustained strength. The uncertainty in financial markets and the ambiguity of Federal Reserve policies may lead to some room for the euro to rebound within 2025. However, in the absence of significant changes in policies and economic prospects, the continued downside risk of the euro against the US dollar still exists.

In summary, the euro/dollar is currently in a low volatility phase, and market sentiment is relatively cautious. In the short term, the euro against the US dollar may continue to consolidate within the range of 1.0332 to 1.0458, but if it falls below the support of 1.04000, it may further test downwards. Investors should closely monitor the upcoming US non farm payroll data and the policy movements of the Federal Reserve, which may become key factors affecting the short-term trend of the euro/dollar.