The EUR/USD currency pair is currently in a downward trend, reaching a new 54-week low and falling below the 1.0500 level. This decline is primarily driven by the strength of the US Dollar and the weak economic outlook for the Eurozone. The US Dollar is gaining strength due to expectations of an expansionary fiscal policy under the new US administration, which could lead to higher inflation and limit the Federal Reserve's ability to implement aggressive monetary easing.Recent US inflation data has also reinforced the view of a resilient US economy, further strengthening the US Dollar. On the other hand, the economic outlook for the Eurozone remains uncertain, with recent EU GDP data failing to provide significant support for the Euro.
Additionally, rising core producer price inflation in the Eurozone is a concern, as it could lead to higher consumer prices in the future. From a technical perspective, the EUR/USD pair is firmly in a downward trend, with the 50-day and 200-day EMAs acting as strong resistance levels, and the recent "death cross" further strengthening the bearish trend.The daily chart shows a strong bearish trend, with the MACD line below the signal line and the histogram extending below the zero line.The EUR/USD pair is likely to experience continued selling pressure due to the power of the US dollar, the unfavorable economic prospects for the Eurozone, and negative technical signals. If the pair falls below the 1.0500 level, it could lead to further drops, with the 1.0400 level being the next possible support area. For a positive turnaround, the pair must break above the 1.0880 level and return to the 50-day and 200-day EMAs.
