The EUR/USD has gained 1.5% since its November 4th bottom, a move that coincided with dovish US private labor data from the Challenger report.
With the U.S. government shutdown beginning to weigh on economic activity, attention has turned toward the Eurozone, which continues to send relatively solid signals:
Inflation remains stable in key economies like Germany and France (see comments from Villeroy), while growth, though modest, remains decent with a 52.5 PMI last week and retail sales up 1% year-over-year.
As confidence grows in the Eurozone’s more politically stable environment—with a few exceptions such as France—and fund managers continue diversifying away from the U.S. dollar, the euro has seen strong dip-buying flows.
Meanwhile, discussions around President Lagarde’s potential successor have emerged, with Knot, Nagel, and De Cos reportedly among the frontrunners—three strong policy voices within the ECB.
By the way, these three members tilt more on the hawkish/conservative side for the Euro, which plays a big role in demand for a currency. This conversation is one to track for the upcoming year, as Christine Lagarde’s term finishes in 2027 (except for any early resignation on her part).
Adding to the supportive tone, European Commission President Ursula von der Leyen announced stricter rules on low-cost Chinese imports, a move interpreted as a sign of European strength, as reflected in today’s market reaction (however, there has been some mean reversion since)
Let’s now dive into the EUR/USD rally and spot the key technical levels for the most traded FX pair.
