EUR/USD, Oil Forecast: two trades to watch

EUR/USD recovers from a 2-year low but gains could be limited

German IFO business climate deteriorates in November
USD eases after Trump’s Treasury Secretary nomination
EUR/USD rises towards 1.05

EUR/USD is recovering from its 2-year low reached last week as the market digests the latest German Ifo survey and Trump's likely nomination for Treasury Secretary.

German IFO data shows that business morale dipped in November, with both current conditions and outlook readings easing compared to the previous month. The data shows the struggles in Europe's largest economy.

The data comes after Friday's PMI figures showed eurozone business activity fell into contractionary territory in November, even before any Trump tariffs were announced or applied. The region's weak economic outlook is raising concerns and expectations that the ECB could cut interest rates more aggressively.

This is in contrast to the Federal Reserve, which is expected to slow the pace of rate cuts amid stronger US economic data and on expectations of inflationary measures likely to be bought in by Trump.

While the US economic calendar is relatively quiet today, the focus will turn to the FOMC minutes and core PCE later in the week ahead of the Thanksgiving holiday.

A hotter-than-expected core PCE, the Fed’s preferred measure for inflation, could further lower rate cut expectations. Currently, the market is pricing in a 55% chance of a 25 basis point rate cut in December.

Today, the USD is heading lower, pausing its recent rally on Trump's Treasury Secretary nominee, Scott Bessent. Bessent F being welcomed by the bond market seen as a fiscal conservative.

That said, Bessent has previously spoken openly about favouring a strong dollar and supporting tariffs, suggesting that any pullback in the USD could be short-lived.

EUR/USD forecast – technical analysis

EUR/USD has recovered from 1.0330 the 2024 low, rising towards 1.5. However, the pair trades below its falling channel and the 50 SMA is crossing below its 200 SMA in a bearish signal.

Sellers will look to extend the downside back below the 10.4 level to 1.0330. A break below here is needed to extend the bearish trend.

The long, lower wick on Friday’s candle, suggesting weak selling demand at those lower levels, could encourage buyers. Buyers will try to extend the recovery above 1.05 and 1.0550 towards 1.06. A rise above here negates the near-term selloff.

Oil steadies after 6% gains last week

Oil rose amid rising geopolitical tensions
OPEC+ meeting & Fed outlook are in focus this week
Oil looks to 71.50 – 72.50 resistance

Oil is holding steady at a two-week high after booking gains of 6% last week. Mountain tensions between the West and major oil producers Russia and Iran raised concerns of supply disruptions.

Oil saw its biggest weekly rise since late September after Russia fired a hypersonic missile at Ukraine and lowered the threshold for a nuclear war. While the Russian oil supply hasn’t been affected, the geopolitical risk premium has increased.

Heading into the new week, prices are easing as investors await more cues on geopolitical developments and the Fed's outlook for policy. US core PCE and the Fed minutes will be released this week.

Attention this week will also turn to the OPEC meeting on December 1st, where the group is likely to keep oil cars in place for longer amid a weak demand outlook. Should the demand outlook remain soft and supply glut fears for next year remain, the unwinding of voluntary production cuts could be pushed back as far as Q2 or later.

Data last week showed that Chinese crude imports rebounded in November as lower prices increased stockpiling demand.

Oil forecast – technical analysis

Oil recovered from the 67.50 low, rebounding higher towards the 71.50 to 72.50 resistance zone, a zone which has stemmed losses and limited gains on several occasions across the year. For now, the picture is neutral.

Buyers will need to rise above 71.50 – 72.50 to create a higher high and change the structure of the chart. Above this zone, 75.00 comes to focus, the round number, and the falling trendline. A rise above here exposes the 200 SMA at 76.90.

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