EUR/USD price sees fresh 3-year low amid dollar strength and ECB dovish policy
EUR/USD hits three-year low amid persistent dollar strength
The EUR/USD pair continues its downward spiral, extending its losses in January 2025. The Euro has been struggling against a strong US dollar, hitting a fresh three-year low last week.
As of the latest session, the pair trades near a key psychological level and raises prospect of further downside in the coming days.
The driving force behind the EUR/USD’s recent decline can be traced to the recent strength of the US Dollar, which was bolstered by a strong US employment report for December. Nonfarm payrolls surged by an unexpected 4.1%, signaling a solid foundation for the US economy as 2025 begins. This stronger-than-anticipated job growth, paired with decent earnings growth, has led markets to forecast that the Federal Reserve will keep interest rates on hold in January, with only one rate cut expected for the year. Such expectations have contributed to the Greenback’s continued strength and put pressure on the EUR/USD.
In contrast, the European Central Bank (ECB) appears poised for a more dovish stance, which could weigh further on the Euro. Policymaker Olli Rehn recently suggested that rate cuts may still be on the horizon for the ECB, citing a weaker growth outlook and prevailing concerns around geopolitical developments in the Eurozone, which further diminished confidence in the currency.
EUR/USD price outlook: 1.0200 psychological support may offer downside relief
As of today, January 13, the EUR/USD pair opened at 1.0240 and declined below 1.0210 in the Asian session. The pair has now traded in negative territory for the fifth consecutive day, highlighting the persistent bearish sentiment. A key focus is the 1.02000 psychological level, which may offer some relief to the Euro due to the RSI on short-term charts indicating an oversold condition but any reversal might only be temporary.
Given the US economic outlook still robust and the ECB likely to remain dovish, the path of least resistance for the EUR/USD currency pair remains to the downside unless there’s a significant shift in the broader economic sentiment.
EUR/USD dipped to a low of 1.02760 on January 8th before halting its decline. The U.S. dollar strengthened due to the Federal Reserve's reluctance to cut interest rates.
