EURUSD
Fundamental Analysis of EUR/USD (February 2025)
This analysis includes updated macroeconomic indicators, geopolitical factors, data from the Commitment of Traders (COT) report, possible scenarios, and a favorable scenario based on existing economic data.
1. Macroeconomic Indicators and Monetary Policy
Eurozone
• GDP and Economic Growth:
• According to ECB projections, the Eurozone GDP is expected to grow by 0.7% in 2024, 1.1% in 2025, and 1.4% in 2026.
• Inflation:
• The Harmonized Index of Consumer Prices (HICP) inflation is projected at 2.4% in 2024, 2.1% in 2025, and 1.9% in 2026.
• ECB Monetary Policy:
• The ECB maintains a cautious approach, signaling the potential to keep interest rates high for an extended period while not ruling out gradual cuts if inflation declines as expected.
• Unemployment and Labor Market:
• The Eurozone unemployment rate stands at 6.1% and is expected to continue decreasing through 2027.
United States
• GDP and Economic Growth:
• The US economy continues to expand at a solid pace, supported by strong consumer spending and a robust labor market.
• Inflation:
• US inflation remains above the 2% target, making the Fed hesitant to cut interest rates in the short term.
• Fed Monetary Policy:
• In its latest FOMC meeting, the Fed maintained the interest rate at 4.25% - 4.50%, signaling a cautious stance on inflation dynamics.
• Unemployment and Labor Market:
• The US unemployment rate remains low, reflecting a strong job market.
2. Geopolitical Factors
• Russia-Ukraine Conflict:
• Continues to impact energy prices and economic stability in the Eurozone.
• US-China Trade Relations:
• Potential additional tariffs on Chinese imports may introduce volatility in financial markets.
• Fiscal Policies:
• High budget deficits in the US could put long-term pressure on the dollar.
3. Commitment of Traders (COT) Report - February 4, 2025
Non-Commercial Traders (Large Speculators):
• Long Positions: 211,000
• Short Positions: 219,900
• Net Position: -8,900 (short on EUR)
• Indicates a bearish sentiment for the euro, with large speculators expecting its depreciation.
Commercial Traders (Hedgers):
• Long Positions: 350,500
• Short Positions: 342,000
• Net Position: +8,500 (long on EUR)
• Suggests that major institutions and corporations anticipate a long-term appreciation of the euro.
Small Traders (Non-Reportable):
• Long Positions: 45,300
• Short Positions: 45,900
• Net Position: -600 (relatively balanced between long and short positions)
Interpretation:
• Large speculators are net short on the euro, suggesting expectations of depreciation.
• Commercial traders (usually hedgers) are net long, indicating a possible bullish correction for the euro in the long term.
4. Possible Scenarios for EUR/USD
Scenario 1: USD Appreciation (Bearish for EUR/USD)
• Triggers:
• The Fed maintains high interest rates.
• The US economy remains strong.
• The ECB adopts a cautious (dovish) tone.
• Outcome:
• EUR/USD may fall below 1.05.
Scenario 2: Consolidation (Sideways Movement)
• Triggers:
• Mixed economic data from both economies.
• The ECB and Fed adopt a wait-and-see approach.
• Outcome:
• EUR/USD remains between 1.07 and 1.10.
Scenario 3: EUR Appreciation (Bullish for EUR/USD)
• Triggers:
• The ECB maintains high interest rates.
• The US economy slows down, forcing the Fed to signal rate cuts.
• Reduced geopolitical tensions in Europe.
• Outcome:
• EUR/USD may rise above 1.12 - 1.15.
5. Favorable Scenario Based on Current Data
Given macroeconomic data, COT positioning, and geopolitical factors, the medium-term favorable scenario for EUR/USD is one of consolidation, with potential euro appreciation.
• Reasons:
• Large speculators are short on the euro, but hedgers are long, which may indicate a potential reversal.
• The Eurozone economy is showing gradual improvement.
• The Fed may adopt a less aggressive stance if the US economy shows signs of slowing down.
• Target:
• EUR/USD may test 1.10 - 1.12 in the coming months.
6. Disclaimer
This analysis is for educational purposes only and does not constitute investment advice. The Forex market is volatile, and trading decisions should be based on individual research and analysis. Any losses resulting from the use of this analysis are the sole responsibility of the investor.
This analysis includes updated macroeconomic indicators, geopolitical factors, data from the Commitment of Traders (COT) report, possible scenarios, and a favorable scenario based on existing economic data.
1. Macroeconomic Indicators and Monetary Policy
Eurozone
• GDP and Economic Growth:
• According to ECB projections, the Eurozone GDP is expected to grow by 0.7% in 2024, 1.1% in 2025, and 1.4% in 2026.
• Inflation:
• The Harmonized Index of Consumer Prices (HICP) inflation is projected at 2.4% in 2024, 2.1% in 2025, and 1.9% in 2026.
• ECB Monetary Policy:
• The ECB maintains a cautious approach, signaling the potential to keep interest rates high for an extended period while not ruling out gradual cuts if inflation declines as expected.
• Unemployment and Labor Market:
• The Eurozone unemployment rate stands at 6.1% and is expected to continue decreasing through 2027.
United States
• GDP and Economic Growth:
• The US economy continues to expand at a solid pace, supported by strong consumer spending and a robust labor market.
• Inflation:
• US inflation remains above the 2% target, making the Fed hesitant to cut interest rates in the short term.
• Fed Monetary Policy:
• In its latest FOMC meeting, the Fed maintained the interest rate at 4.25% - 4.50%, signaling a cautious stance on inflation dynamics.
• Unemployment and Labor Market:
• The US unemployment rate remains low, reflecting a strong job market.
2. Geopolitical Factors
• Russia-Ukraine Conflict:
• Continues to impact energy prices and economic stability in the Eurozone.
• US-China Trade Relations:
• Potential additional tariffs on Chinese imports may introduce volatility in financial markets.
• Fiscal Policies:
• High budget deficits in the US could put long-term pressure on the dollar.
3. Commitment of Traders (COT) Report - February 4, 2025
Non-Commercial Traders (Large Speculators):
• Long Positions: 211,000
• Short Positions: 219,900
• Net Position: -8,900 (short on EUR)
• Indicates a bearish sentiment for the euro, with large speculators expecting its depreciation.
Commercial Traders (Hedgers):
• Long Positions: 350,500
• Short Positions: 342,000
• Net Position: +8,500 (long on EUR)
• Suggests that major institutions and corporations anticipate a long-term appreciation of the euro.
Small Traders (Non-Reportable):
• Long Positions: 45,300
• Short Positions: 45,900
• Net Position: -600 (relatively balanced between long and short positions)
Interpretation:
• Large speculators are net short on the euro, suggesting expectations of depreciation.
• Commercial traders (usually hedgers) are net long, indicating a possible bullish correction for the euro in the long term.
4. Possible Scenarios for EUR/USD
Scenario 1: USD Appreciation (Bearish for EUR/USD)
• Triggers:
• The Fed maintains high interest rates.
• The US economy remains strong.
• The ECB adopts a cautious (dovish) tone.
• Outcome:
• EUR/USD may fall below 1.05.
Scenario 2: Consolidation (Sideways Movement)
• Triggers:
• Mixed economic data from both economies.
• The ECB and Fed adopt a wait-and-see approach.
• Outcome:
• EUR/USD remains between 1.07 and 1.10.
Scenario 3: EUR Appreciation (Bullish for EUR/USD)
• Triggers:
• The ECB maintains high interest rates.
• The US economy slows down, forcing the Fed to signal rate cuts.
• Reduced geopolitical tensions in Europe.
• Outcome:
• EUR/USD may rise above 1.12 - 1.15.
5. Favorable Scenario Based on Current Data
Given macroeconomic data, COT positioning, and geopolitical factors, the medium-term favorable scenario for EUR/USD is one of consolidation, with potential euro appreciation.
• Reasons:
• Large speculators are short on the euro, but hedgers are long, which may indicate a potential reversal.
• The Eurozone economy is showing gradual improvement.
• The Fed may adopt a less aggressive stance if the US economy shows signs of slowing down.
• Target:
• EUR/USD may test 1.10 - 1.12 in the coming months.
6. Disclaimer
This analysis is for educational purposes only and does not constitute investment advice. The Forex market is volatile, and trading decisions should be based on individual research and analysis. Any losses resulting from the use of this analysis are the sole responsibility of the investor.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.