EUR/USD 2024-2025: Technical and Macroeconomic Outlook of the Most Traded Pair Forecast

Why Does the Euro Dollar Dominate the Forex Market?

The EUR/USD pair represents the meeting of two major economies: the European Union and the United States. Since its introduction in 1999, it has established itself as the most liquid and traded exchange instrument worldwide, surpassing historic currencies like the German mark and the French franc.

Data from the Bank for International Settlements (BIS) highlight this dominance: the average daily volume in the spot market reaches $2.2 trillion, while considering forwards and derivatives, the global Forex market moves $7.5 trillion daily. This extraordinary volume makes the euro dollar an asset of unmatched depth, where price movements tend to be more stable than in other secondary pairs.

Macroeconomic Factors Shaping the EUR/USD in 2024-2025

Beyond technical charts, the true driver of the euro dollar forecast lies in the monetary policies of both regions.

The interest rate cycle: the market’s compass

The Federal Reserve ended its rate hike cycle in July 2023 with rates at 5.50%, while the ECB did so in September 2023 at 4.50%. Since then, both institutions have maintained a strategic pause before beginning to cut rates.

Market projections suggest that the FED will be the first to ease: a reduction to ranges of 4.50%-4.75% is expected in December 2024, and 3.75%-4.00% in 2025. The ECB would follow this trajectory, albeit with some lag, reaching 4% in 2024 and 3% in 2025.

This differential in pace would initially benefit the euro, as a weaker dollar due to rate cuts tends to appreciate less than other currencies. However, by 2025, if both institutions converge in their policies, the scenario could rebalance.

Inflation: the decisive factor

The trajectory of both economies will critically depend on how inflation evolves. If inflationary pressures persist, central banks will need to keep rates high for longer, complicating bullish forecasts for the euro.

Technical Analysis of EUR/USD Evolution

Chart pattern and mixed signals

The price chart shows an ascending triangle, with resistance at key levels. The moving averages (50, 100, and 200 sessions) do not reveal a clear trend: the pair breaks supports downward but recovers with intraday volatility.

The Relative Strength Index (RSI) positions the asset in contraction territory without reaching oversold levels, suggesting room for movements in both directions. Meanwhile, the Directional Index (DMI) indicates relative weakness, though bullish crossovers could occur in the short term.

Fibonacci projections for 2024-2025

Applying Fibonacci extensions, the technical forecast for the euro dollar presents different scenarios:

For 2024: The first bullish target is at 1.12921, assuming a favorable hypothesis for the euro conditioned on the FED reducing rates before the ECB.

For 2025: The extension points to a potential peak at 1.21461 before experiencing a correction. This eventual decline would find support at 1.15, avoiding deeper breaches that could threaten the bullish structure.

Factors Driving or Hindering the EUR/USD

Positive catalysts for the euro

• Increase in rates by the ECB
• Economic recovery in the Eurozone
• Unemployment reduction
• Greater intra-Eurozone banking activity
• Contraction of the money supply

Pressures on the euro

• Massive liquidity injections expanding the balance sheet
• Interest rate cuts
• Debt purchase programs
• Rise in unemployment (especially in peripheral countries)
• Geopolitical vulnerabilities such as the energy crisis stemming from Ukraine

Support for the dollar

• FED balance sheet reductions
• Interest rate hikes
• Repatriation of corporate capital
• Demand for safety during financial crises
• US GDP growth

Risks for the dollar

• Entry into an economic recession
• Gradual withdrawal by emerging economies
• Monetary expansion generating inflation
• Loss of confidence in Treasury bonds

How to Interpret EUR/USD Movements

The price formation in this pair reflects the combination of all these factors simultaneously. A key aspect is that valuation can improve due to merits—such as European economic strength—or due to external shortcomings, like a financial crisis in the US.

The market depth of the euro dollar means that price changes are more gradual than in exotic pairs. This makes it attractive for both intraday and medium-term strategies, reducing abrupt jumps typical of less liquid assets.

Methods to Trade EUR/USD

At the retail level, there are several options depending on the investor profile:

Investment funds: Offer exposure to currencies but do not directly capture exchange rate fluctuations, making them less efficient for tactical trading.

Futures on EUR/USD: Forward contracts that generate profit if the exchange rate moves as forecasted within the agreed timeframe. They require significant initial capital.

CFD on EUR/USD: Allow access to relevant positions with reduced capital through leverage, ideal for capturing short-term movements. A standard lot in Forex represents 100,000 units of the base currency, so small percentage changes can have significant impacts on P&L.

CFDs facilitate both long (betting on euro appreciation) and short (if depreciation is expected), providing flexibility to hedge portfolios or speculate directionally.

Lessons from Historical Behavior

Since 2008, EUR/USD has traded within a long-term downward channel, initiated when the FED cut rates to 0% to combat the financial crisis while the ECB maintained high rates.

The COVID-19 pandemic was a turning point: massive US measures ($2 trillion stimulus packages) pushed the pair from 1.0780 (March 2020) to 1.2299 (end of 2020). Subsequently, the ECB’s TLTRO programs eroded that advantage.

The real break came in February 2022 with the invasion of Ukraine, worsening the European geopolitical crisis. Although there was a trend reversal in September of that year, the pair faces strong resistance at 1.1255, a level that defines the current battle between forces.

Risks That Could Invalid the Forecast

The forecast should not be considered certain. Unexpected events —“black swans”— can reshape the landscape: systemic financial crises, unexpected political changes, energy supply shocks, or jumps in global inflation.

Additionally, economies go through asymmetric cycles: a problem in one region can be an opportunity in another, complicating linear forecasts.

Conclusion: Is the EUR/USD Strategy Viable in 2024-2025?

The euro dollar remains the most stable and liquid pair in the Forex market. Its relatively low volatility and massive capital flow make it attractive for investors seeking exposure to macroeconomic changes without risking liquidity shocks.

The forecast for EUR/USD over the next 18 months will depend on how rate cuts materialize, inflation dynamics, and geopolitical events. Monitoring inflation indicators, central bank communications, and economic activity data is essential for calibrating positions.

Those betting on dollar weakening will take long positions in EUR/USD, while skeptics of the euro will opt for short positions. The key is to size positions according to risk tolerance and avoid extrapolating past results as guarantees of future performance.