FX.co ★ Fixy | EUR/USD

As last week drew to a close, the EUR/USD pair saw another reversal in favor of the euro (the common currency). Prior to this, the exchange rate had dipped below recent lows, completing a "liquidity sweep" that laid the technical groundwork for a subsequent rebound. This structural setup bolstered expectations that bulls might finally initiate a sustained upward trend, especially given that bears had maintained downward pressure for an extended period without encountering any significant resistance. With recent news being mixed rather than one-sided, the euro—from a technical perspective—still has room for an upward correction, targeting the "imbalance zone at 24"—an area that could potentially trigger fresh bearish reactions or sell signals. Nevertheless, ahead of the U.S. congressional election results, market sentiment remains tilted in favor of the dollar. Even though neutral analysis suggests that the ruling party—led by Donald Trump—might face setbacks, traders continue to interpret political dynamics as positive signals for the dollar; amidst the prevailing uncertainty in macroeconomic policy, they remain keen to find reasons to push the dollar higher. This persistent strength in the dollar appears somewhat detached from the reality of monetary policy, as the Federal Reserve’s current stance is far less hawkish than what had been widely anticipated. At its most recent meeting, the Federal Reserve adopted a neutral stance, with only two members of the Federal Open Market Committee (FOMC) voting in favor of further monetary tightening. This decision does not justify the dollar’s continued suppression of the euro. While U.S. economic growth in the third quarter exceeded expectations, the Eurozone economy also outperformed forecasts; the European Central Bank, while maintaining current interest rates, hinted at the possibility of monetary tightening in December—a move that would align with the Federal Reserve’s potential actions. In general, the economic conditions and the monetary policy trajectories of the central banks in both regions are quite similar; yet, market flows have disproportionately favored the dollar. The current bearish structure remains robust until a clear bullish confirmation pattern emerges that invalidates the "imbalance zone 24." Consequently, despite supportive fundamental factors, buying the euro at this juncture carries significant risk.

Looking ahead, several macroeconomic structural factors could pave the way for a broader appreciation of the euro by 2026. The overarching fiscal and political framework of the Donald Trump administration—which contributed to a substantial decline in the dollar’s value last year—remains largely unchanged. Barring sporadic geopolitical developments or regional tensions in Europe that might weigh on Eurozone market sentiment, the structural factors supporting a sustained rise in the dollar are extremely limited. Regarding economic data, the release of less significant reports—such as the U.S. Job Openings and Labor Turnover Survey (JOLTS)—did not materially influence market direction, leaving the market’s focus entirely on the election results. For technical traders, it is advisable to remain on the sidelines and await a clear price reaction at the "imbalance 24" level, or a major structural market break, before making any strategic moves. Given the strong momentum of the current downtrend, concrete evidence that this trend has reached its exhaustion point is required before a genuine reversal can occur.