EUR/USD is a little oversold in the short term so we may get a bounce but it won't be sustained and we see far lower prices - The eurozone is a car crash and while it has seen a big move down we see far more downside to 1.000 or even lower- any bounce is a selling opportunity...

Below are some views on the EUR which we agree with...

DB's Saravelos has crushed it calling the most recent euro short. His latest view summed up: "... if the Trump agenda is implemented in full force and quickly without a countervailing policy response from Europe or China, we could see EUR/USD drop through parity to 0.95 cents or even below. This would be an overshoot that takes the real trade-weighted dollar to record highs, exceeding the Volcker period. A more balanced approach to the various scenarios would suggest a EUR/USD drop to 1.00 that matches the dollar's historical record highs but does not exceed it.

Goldman also sees a parity-push potential: "Our European economists estimate that trade uncertainty and other factors will result in a 0.5% hit to real GDP in the Euro area and reinforce the case for ECB rate cuts. This demonstrates why even if tariffs are focused on China, as we expect, there is still a far-reaching impact on currency markets. We have estimated that the divergent policy implications could weaken the Euro by about 3%, or even push EUR/USD below parity in the case of a global baseline tariff and commensurate tax cuts." (Goldman)

CITI sees rallies as selling opportunities "We have long flagged short EURUSD as our preferred G10 expression for a Trump win given underpriced tariff risk. After the election results, we noted we would like to sell EURUSD rallies rather than chase price action. Thurday's developments provide better risk/reward for EURUSD shorts, and Chair Powell's presser indicated some potential for slowing the pace of easing next year, which is marginally USD positive (though forward curves are already pricing this to an extent). Moreover, Trump premium still does not look fully priced if Republican control of the House is confirmed, and we see the potential for another ~3% in EURUSD downside as a result" (CITI)

It's not looking good for the euro and the people who think the worst is priced in are too optimistic in our view.

The Republicans now control both houses, tariffs are coming to hit an already weak eurozone economy and the two biggest economies in the eurozone are struggling - not just with weak economies but also political problems in France we have political deadlock and in Germany Sholtz's coalition has collapsed. The economy is slowing, tariffs have the potential to push it into recession and there are a lot of political problems in the zone.

TARIFFS: "Our European economists estimate that trade uncertainty and other factors will result in a 0.5% hit to real GDP in the Euro area and reinforce the case for ECB rate cuts. This demonstrates why even if tariffs are focused on China, as we expect, there is still a far-reaching impact on currency markets. We have estimated that the divergent policy implications could weaken the Euro by about 3%, or even push EUR/USD below parity in the case of a global baseline tariff and commensurate tax cuts." (Goldman)

GDP US V Germany which is the biggest economy in the eurozone, GDP is weak which will impact the whole zone - the gap between the US and the zone looks set to worsen.

We of course have a collapse of the German Government and over in France we also have political deadlock which won't help France deal with its fiscal problems.

The German economy which is the biggest in the zone has seen no growth in six years and its auto industry its major driver of exports has collapsed...

The outlook for European v US growth could be set to decline.

The European Central Bank has cut its policy rate multiple times and has signaled that more interest rate cuts are coming. Inflation has begun to move down toward the central bank’s 2% target and economic growth has been stagnant and shown no signs of a recovery.

There are no signs of economic recovery so we would expect the ECB to keep cutting interest rates. We expect consecutive interest rate cuts at the upcoming meetings and in 2025 more cuts. Tariffs on Europe, especially the German auto sector, will put downward pressure on an already vulnerable economy and possibly cause recession. Diverging monetary policy and the potential for tariffs add weight to our view that EUR/USD will go to 1.000 or lower - Trump’s stance on NATO and military defense spending has hurt the ongoing tightening of asset swap spreads, which could put additional downward pressure on the euro.

We think the big fundamentals are firmly against the Euro sure we are oversold in the short term but see only corrections of oversold there is no big trend change coming in our view the big trend is down and we expect far lower prices.

Technical Analysis 

We have outlined the key levels of support and resistance in our view on both the monthly and daily charts