EUR/USD touched a 7-month low on Monday, bringing April’s monthly low into focus as traders anticipate potential economic pressures that could push the ECB to deepen rate cuts. Market sentiment is turning increasingly bearish as factors like possible U.S. trade policy changes under President-elect Donald Trump, a stalled economic recovery in China, and German election uncertainties weigh on the euro. The risk of Trump appointing a hard-liner as U.S. trade representative, which could lead to stricter trade measures, adds pressure on EUR/USD. Concerns are also mounting around China’s economic data, with October’s CPI and PPI expected to reveal continued weakness in Chinese growth, which could directly impact Europe given their strong trade ties.
Technically, EUR/USD is showing signs of fragility, as the pair remains below key support levels. A break below April’s low would signal an acceleration of the downtrend, with parity as a longer-term target. The downside risk is further supported by December Euribor futures, where the formation of a bull pennant and a large cup-and-handle pattern suggest traders expect ECB rates to decline significantly. If the ECB signals a deeper rate cut path than the Fed, the dollar’s yield advantage over the euro could surge, potentially driving EUR/USD toward parity. Immediate support levels are situated near April’s low, while resistance stands around 1.0780. A sustained break below current levels could open the door to new lows as global economic uncertainty looms over Europe.
In the short term, EUR/USD bears are likely to remain in control as long as global uncertainties and ECB rate expectations favor the dollar. With critical data from China and the U.S. on the horizon, any disappointing economic indicators or hawkish trade policy shifts could exacerbate downward pressure on EUR/USD, reinforcing its bearish outlook.