EUR/USD 2024-2025: Analysis of the most traded currency pair in Forex

Why is the euro/dollar the most important pair in the market?

When we talk about the global currency markets, without a doubt, the EUR/USD holds a prominent position. It is the combination of the currencies from two colossal economic blocks: the European Union and the United States. Since its official inclusion in 1999, this pair has established itself as the most liquid instrument in the Forex market, far surpassing other historically relevant pairs like the German mark or the Italian lira.

The numbers speak for themselves. According to data published by the Bank for International Settlements (BIS), an organization grouping institutions representing approximately 95% of the global GDP, the average daily trading volume in the spot market reaches 2.2 trillion dollars. When adding other derivatives and forwards, the total figure reaches 7.5 trillion dollars daily. This magnitude makes the EUR/USD the most faithful reflection of macroeconomic dynamics between these two powers.

Current technical analysis: Where is the pair headed?

The current technical outlook shows an interesting formation. At present, EUR/USD is within an ascending triangle, where key resistance levels are positioned at strategic points that deserve attention.

Regarding the moving average indicators (periods 50, 100, and 200), the reading is not entirely conclusive. The pair has been oscillating without establishing a clear trend, showing back-and-forth movements characteristic of market indecision.

The RSI remains in a contracting territory, approaching but not yet reaching the oversold level. Simultaneously, the DMI index indicates a downward inclination, although there is a possibility of an imminent crossover that could change the current composition.

The Fibonacci extension provides concrete targets for projecting future movements. These technical levels form the basis on which we build our forecast for both years.

Forecast scenario for 2024

Under a favorable context for the European single currency, the first year-end target would be around 1.12921. This level represents a significant advance from current prices and would reflect a gradual strengthening of the euro over the coming months.

To reach this target, it will be essential to maintain certain balances in the monetary policies of both regions, an aspect we will analyze in detail later.

Horizon to 2025: Greater range of movements

Extending the analysis to 2025, the central scenario suggests that the pair could reach highs around 1.21461 before experiencing a correction. However, this potential pullback should not go beyond 1.15, indicating a maintenance of the euro’s gradual strengthening during this period.

Monetary policy: The determining factor

The real engine that will drive the EUR/USD during 2024 and 2025 will be the convergence, albeit uneven, in the monetary easing cycles of both the Federal Reserve and the European Central Bank.

Both institutions froze their rates at historic levels: the Fed reached 5.50% at the end of July 2023, while the ECB hit 4.50% in September of the same year. They are now in a pause phase before the expected cuts.

Analyst estimates suggest that the Fed will start reducing rates in December 2024, bringing its rate to the 4.50%-4.75% range, with further cuts expected by December 2025 to the 3.75%-4.00% range. The ECB, on the other hand, is projected to be at 4% by the end of 2024 and 3% by the end of 2025.

Historically, the Federal Reserve has set the pace during previous crises, and evidence suggests this pattern will repeat. Since the Fed is the first to initiate cuts, the dollar could be pressured downward in relative terms, which would favor an appreciation of the euro in the short term.

However, by 2025, there is a possibility that rate differentials will balance out, potentially allowing a rebound in the dollar. Inflation will remain the key variable determining both the magnitude and timing of these movements.

Historical evolution of the pair: Context to understand the present

Since 2008, EUR/USD has gravitated within a significant downward channel. This movement originated during the Great Financial Crisis, when the Fed aggressively cut rates to near zero while the ECB maintained more restrictive stances under Jean-Claude Trichet.

The COVID-19 pandemic episode introduced extreme volatility. The United States, moving swiftly, implemented massive stimulus packages (reaching 2 trillion dollars with just 800 deaths recorded). The EUR/USD went from 1.0780 on March 25, 2020, to 1.2299 at the end of that year.

However, the ECB’s TLTRO programs began to level the waters. The real inflection point came in February 2022 with the invasion of Ukraine, which significantly deteriorated Europe’s geopolitical position. Although a trend reversal occurred in September, there is currently significant resistance at 1.1255 that has halted larger advances.

Macroeconomic factors shaping the dollar

Elements favoring USD strengthening:

• Reduction of the Federal Reserve’s balance sheet (quantitative tightening)
• Interest rate hikes
• Repatriation of capital by U.S. corporations
• Function as a safe haven currency during financial crises
• Growth of the North American GDP

Elements exerting downward pressure on the dollar:

• US recession onset
• Gradual abandonment of the dollar by alternative economies
• Expansion of the Fed’s balance sheet causing inflation
• Interest rate reductions
• Erosion of confidence in US economic stability

Elements boosting the euro

Positive factors for the EUR:

• Rate hikes by decision of the ECB
• Gradual improvement of economic indicators in the eurozone
• Decrease in unemployment across member countries
• Increased activity in interbank transactions
• Growth of aggregate GDP
• Strategy of reducing monetary reserves

Negative pressures on the EUR:

• Massive liquidity injections expanding monetary aggregates
• Rate reductions eroding value
• Historical programs of sovereign debt purchases
• Increase in unemployment in specific economies
• Geopolitical turbulence (conflicts, sanctions, energy crisis)

How prices are formed: Market depth

The confluence of all these factors generates a multitude of possible scenarios. What sets the EUR/USD apart from other pairs is its market depth. Being the most traded combination globally, movements tend to be smoother compared to exotic pairs where volume is limited.

It is crucial to understand that the price is formed both by its own merits and by external demerits. A stagnant eurozone can appreciate simply because a crisis in the United States erupts. Conversely, a situation with no changes in the dollar can depreciate due to surprising improvements in Europe.

Depending on the chosen analysis criteria, traders can position themselves long or short. Optimists about the euro would take long positions in EUR/USD, while dollar bulls would seek short positions in this pair or long in USD/EUR.

Available options to participate in the currency market

There are different alternatives for those wishing to expose themselves to EUR/USD movements:

Investment funds: Allow exposure to currencies, although they typically invest in monetary instruments rather than directly exploiting exchange rate fluctuations.

Futures contracts: These are forward agreements where profit depends on the exchange rate at the maturity date favoring the position taken.

Derivatives (CFD): Offer access to significant positions with reduced capital thanks to leverage, enabling both short-term strategies and intraday operations. A standard Forex lot equals 100,000 units of the base currency.

Considerations on risks and volatility

Despite the forecasts expressed, it is essential to recognize that no projection is an absolute truth. Unexpected events (black swans) can impact any economy or region positively or negatively.

Global dynamics imply that a problem in one geography can be equivalent to a solution in another or generate additional complications. Both EUR and USD will remain main references in Forex, so structural volatility will not be a particular concern.

Conclusion: Is investing in EUR/USD viable in 2024?

EUR/USD continues to be one of the most accessible and liquid options for participating in currency markets. Its relatively low volatility, combined with market depth, makes it suitable for various types of traders.

Constant monitoring of macroeconomic indicators—especially monetary policy decisions, inflation data, and growth figures—is essential. Historically, US economic data have reliably foreshadowed subsequent movements of the ECB, a pattern likely to continue in these years.

Profitability will depend on entry timing, risk management, and the ability to adapt to changing market conditions.