EURUSD, Dow Forecast: On Edge Ahead of Key US Data

Key Events

• ISM Manufacturing PMI remains below 50, highlighting 2025 tariff uncertainty
• JOLTS Job Openings rebound from 2-year lows
• DXY holds above key support ahead of key US economic data
• Friday’s NFP results and Fed rate expectations
• Technical Analysis: DXY, EURUSD, and Dow Jones.

US Economic Data and Dollar Risks for 2025

The first week of December highlights a cautious outlook for 2025, as ISM Manufacturing PMI—a leading economic growth indicator—remains below the 50-mark for the 8th consecutive month. While economic stimuli and tax benefits continue to drive US indices to record highs, tariff risks for 2025 are on the rise, posing challenges for the cooling inflation narrative and the currency market.

With heightened volatility expected from ISM Services PMI, Powell’s comments, and NFP data, the DXY sits at critical support, and US indices hover at historic highs. If the DXY breaches the 108 level, the EURUSD could face significant downside pressure, potentially falling toward parity and below.

Technical Analysis: Quantifying Uncertainties

DXY Forecast: Monthly Time Frame – Log Scale

Source: Tradingview

The DXY's 16-year primary uptrend and channel reflects persistent upside risks: 

Upside Potential: A firm close above the 108 level could push the DXY toward 110.30, 113.60, 116.80, and 120.20, reaching the upper channel boundary.

Downside Risks: Failure to hold above the mid-channel resistance and 108 level could see the Dollar decline toward the channel’s lower boundary, with key support between 99.60, 96 and 94.

EURUSD Forecast: Monthly Time Frame – Log Scale

Source: Tradingview

The EURUSD exhibits a clear bearish trend, consolidating just below the resistance of its primary downtrend and channel since 2008

Upside Potential: From a long-term perspective, a sustained break above 1.13 could see the Euro target 1.2.

Downside Risks: A drop below 1.033 increases the likelihood of parity, with further downside toward 0.98.

Short-Term Outlook:

Resistance levels at 1.06, 1.07, and 1.0780 are crucial before the pair can extend toward 1.0950 and 1.13.

Dow Forecast: Weekly Time Frame - Log Scale

Source: Tradingview

The Dow’s uptrend has potentially paused at the previously highlighted 45,000 resistance, as discussed in my article "Dow Jones Forecast: Intensifying Uptrend, Where's the Next Resistance?" Looking ahead: 

• Upside Potential: A decisive close above 45,200 could propel the Dow toward the 47,000 mark.

• Downside Risks: A pullback below 45,000 may lead to retests of support levels at 43,300, 42,300, and 41,500, aligning with the uptrend support line connecting consecutive lows since 2020.

--- Written by Razan Hilal, CMT on X: @RH_waves