EUR/USD: The pair starts 2025 the way it finished 2024

Market psychology remains the same on the EUR/USD pair, with the greenback being favoured by the offensive tone adopted by the Fed at the end of the last FOMC of the year, and the Euro being penalised by political instability in France and Germany, and by a relatively unresilient economic health.

As a reminder, this meeting of the Fed's Monetary Policy Committee ended unsurprisingly on 19/12 with a 25 basis point cut in the remuneration of the Fed Funds.

But the powerful central bank also published an update of its economic projections, highlighting the great strength of the labour market. The Fed suggests that it could only lower rates by 50 basis points cumulatively, over the whole of next year.

The Fed has therefore adopted a rather offensive tone, in particular due to the still chronic tensions on the labor market. As it does every quarter, it published a document that is highly anticipated by the markets: the famous dot plots. This dot plot shows that the median anticipation of Fed members for 2025 only incorporates 50 basis points (0.5 percentage points) of rate cuts. However, in the previous dot plots, in September, members anticipated a rate cut of 100 basis points over 2025.

This is therefore a decoupling that will occur between policies and therefore monetary trajectories on both sides of the Atlantic. "While two weeks ago, without saying a word, the ECB had undertaken a "dovish" turn at its last monetary policy meeting of the year by indicating that restrictive key rates were no longer necessary, the members of the Fed seem, for their part, to be following a completely different path. For those who were expecting a Christmas present from Jerome Powell, you will have to come back..." says Thomas Giudici, head of bond management at Auris Gestion.

A decoupling further illustrated today by the publication of the final data of the PMI barometers of activity in the industry in the Eurozone, confirmed at almost 5 points below the 50-point mark, at 45.1, which gives an idea of ​​the contraction, due in particular to German structural difficulties. "Despite the approach of the end-of-year holidays, the economic situation remained gloomy in the manufacturing sector of the Eurozone. Unsurprisingly, the trends are downward in December. The decline in new orders has even increased compared to October and November, in turn leading to an acceleration in the decline in work in progress and thus destroying any hope of an imminent recovery in activity", notes coldly Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank.

Right now, the EUR/USD is trading at $1.0258.

KEY CHART ELEMENTS
The post-FOMC drop has given way to the formation of a wedge, between the lower limit of the Bollinger Bands and the 20-day moving average (in dark blue), an increasingly valuable benchmark.

MEDIUM-TERM FORECAST
In view of the key graphic factors that we mentioned, our opinion is negative in the medium term on the EUR/USD.

Our entry point is at $1.0317. The price target of our bearish scenario is at $1.0001. To preserve the capital invested, we advise you to position a protective stop at $1.0451.