EUR/USD price opens 2025 near two-year low amid Fed hawkish outlook
EUR/USD price forecast
EUR/USD currency pair opened the new year on a vulnerable note, holding near a two-year low of 1.03310.
The currency pair struggled significantly in the latter months of 2024, falling from a multi-month high of 1.1220 to the recent low. Despite some attempts to recover, EUR/USD has faced repeated resistance at the 1.04600 level, which continues to pose a significant hurdle.
EUR/USD price dynamics (November 2025-January 2025). Source: TradingView.
The primary factor influencing the pair’s movement is the strength of the US Dollar (USD), which remains supported by expectations of a slower pace of interest rate cuts by the Federal Reserve (Fed). The Dollar Index (DXY) is holding firm near 108.50, reflecting ongoing optimism about the US economy and a shift in Fed policy. While the central bank reduced its key borrowing rates by 100 basis points in 2024, the outlook for 2025 has shifted, with the Fed projecting Federal Fund rates to remain higher at 3.9% by the end of the year, up from the previously expected 3.4%.
EUR/USD price forecast: US Dollar strength weigh on the Euro
The impact of this on EUR/USD is clear. As the USD continues to reach fresh highs, the euro struggle to regain ground will be weakened. In addition, key economic data has been largely supportive of the USD’s dominance. The upcoming release of the US ISM Manufacturing PMI, expected to dip slightly to 48.3 from 48.4, signals that manufacturing activity continues to contract, but the impact on the USD could be limited given the broader economic context.
Looking at technicals, the EUR/USD remains weak with the Relative Strength Index (RSI) declining below 50, suggesting further downside potential, although it has not yet reached oversold levels. The resistance at 1.04600 is reinforced by the 100-period Exponential Moving Average (EMA), which has acted as a firm barrier in recent attempts at recovery.
Therefore, as the USD continues to benefit from robust economic expectations and Fed guidance, the euro faces a difficult path ahead, with the possibility of further downside in the coming months.
EUR/USD is confined to a narrow trading range due to the holiday season, with limited market activity. The previous week’s price action saw EUR/USD drift lower, testing support near the November low of 1.0330 after a brief recovery.
