• As previously anticipated, the EUR/USD pair has maintained a downward trend, stabilizing around and below the 1.05 support level, confirming the strong dominance of bears in the market.
• At the beginning of today's crucial Wednesday trading session, the Euro-Dollar pair is stabilizing around the 1.0485 support level.
• Today, the primary focus will be on the release of Eurozone inflation figures and the US Federal Reserve's policy announcement.

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Uncertainty Surrounding France and Germany Weighs on the Euro

According to licensed trading platforms, the Euro continues to be negatively impacted against other major currencies due to the political and economic uncertainty of the Eurozone's largest economies - Germany and France - at a time when the bloc's economy is generally weak. The European Central Bank has been forced to ease its monetary policy. The latest setback for the Euro came from Germany, where German Chancellor Olaf Scholz lost a confidence vote, leading to elections likely to be held on February 23. In France, new French Prime Minister François Bayrou must quickly form a government and assemble a 2025 budget.
 

European Stocks Under Selling Pressure

During yesterday's trading, according to stock trading platforms, European stock markets stumbled amid weak investor sentiment and anticipation of the release of Eurozone inflation figures and the US Federal Reserve's policy decision. According to the trading, the Eurozone STOXX 50 index fell by 0.1% to 4943 and the STOXX 600 index for all European stocks fell by 0.4% to 514.

The most notable performance was the decline of financial company stocks, with shares of Santander, Intesa Sanpaolo, and BBVA losing between 4% and 1.5%. Meanwhile, low oil prices caused shares of TotalEnergies and Eni to decline by 1.2% and 2.4%, respectively. On the other hand, ASML shares closed with a sharp rise of 2%. Overall, European stock indices recorded lower performance in 2024 compared to US stock indices, which benefited from their high focus on technology stocks. The STOXX 600 index rose by only 7.2% in 2024 compared to gains of the S&P 500 index, which reached 27%.
 

Trading Tips:

The euro is under pressure and could continue for some time, so any bounce higher could be a chance to sell the euro again this week, which will be fateful for the euro’s closings in 2024.
 

The German economy is far from exiting the recession.

It is not surprising to see another gloomy economic reading from Germany, but better days are ahead, according to one economist. A leading sentiment survey in Germany shows that the Eurozone's largest economy is no closer to exiting the recession, although 2025 brings hope as the new government has no choice but to invest. According to economic calendar data, the German Ifo business climate index fell to 84.7 points in December, down from 85.6 points in November. This was the lowest level since May 2020 and the decline was due to more pessimistic expectations, although German companies assessed the current situation as better.
 

Overall, the report confirms the chronic weakness of the German economy:

Manufacturing: The index declined significantly, with German companies expressing less satisfaction with their current business and significantly more pessimistic expectations. Also, Order books deteriorated, and production cuts were announced.

Services sector: The business climate index deteriorated due to more sceptical expectations, but the current situation was assessed as somewhat better. The restaurant sector reported positive Christmas business, while the transport and logistics sector are concerned about the coming months.

Understanding the IFO Survey: The German IFO business climate index is based on nearly 9,000 monthly responses from companies in manufacturing, services, trade and construction. Through it, companies provide assessments of their current business situation and their expectations for the next six months. Finally, the index is calculated using the balance of responses and normalized to the average of 2015.

EUR/USD Analysis Today:

We still emphasize the strength of the downward trend in the Euro against the US Dollar EUR/USD and that approaching around and below the support level of 1.05 continues to stimulate more bear control over the trend. Therefore, If the US economic releases and the Federal Reserve Bank announcement are in favour of the strength of the dollar. More selling pressures may collide with the support levels of 1.0420 and 1.0300 respectively. From there, technical indicators may start giving strong oversold signals, led by the Relative Strength Index (RSI) and the momentum indicator.

Conversely, if the data supports the Euro, the downward trend of the Euro-Dollar will not be broken without returning to the resistance levels of 1.0665 and 1.0800, respectively. Overall, we still adhere to the strategy of selling the Euro-Dollar but without taking risks and activating take-profit and stop-loss orders to ensure the safety of the trading account from any sudden price reversals.

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