EUR/USD started 2025 with strong bearish momentum, breaking below the psychological 1.0300 level for the first time since late 2022. The pair’s move to 1.02244 reflects sustained selling pressure, driven by diverging monetary policies between the Federal Reserve and the European Central Bank (ECB).
While the Fed is expected to cut rates by just 44 basis points this year, markets anticipate a more aggressive 100 bps of easing from the ECB. This widening interest rate differential has reinforced dollar strength, keeping EUR/USD under pressure.
See also: USD Hikes as U.S. Economic Strength Drive Gains
Picture: EURUSD consolidates near 1.027 as momentum stabilises, as seen on the VT Markets app.
Looking at the chart, EURUSD stabilised near 1.02729 after bouncing off a session low of 1.02244. The pair faced early selling pressure but found strong support at 1.022 before recovering modestly.
The 1.0200 level, corresponding to the 23.6% Fibonacci retracement of the 2021-2022 major move, is the next critical support zone for EUR/USD. This level has historically been a turning point:
Given the proximity of recent lows to 1.0200, this level could attract buying interest, particularly as the pair shows signs of being oversold.
The MACD histogram on the chart indicates waning bearish momentum, supporting the possibility of a bounce.
As EUR/USD stabilises near its recent lows, market participants might anticipate further consolidation before any significant directional move.
A recovery toward 1.0300 could materialise if buyers step in near support, but sellers may continue to target 1.0200 and beyond if bearish momentum builds.
While the pair’s medium-term outlook remains influenced by the policy divergence between the Fed and the ECB, oversold technical conditions suggest that short-term volatility could present trading opportunities in either direction.
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