EUR/USD slumps to two-year low as growth concerns weigh

• EUR/USD shed another full percent as Euro fears simmer.
• European Manufacturing PMI missed the mark, implying steepening contraction expectations.
• ECB policies are expected to diverge steeply from the Fed this year.

EUR/USD dumped another full percentage point on Thursday, kicking off 2025 with its lowest prices in two years. The Euro fell below 1.0250 against the Greenback since November of 2022 and putting Fiber on pace to close for a fourth straight month in the red if things don't improve in January.

Pan-European Manufacturing Purchasing Managers Index (PMI) survey results fell slightly in December, ticking down to 45.1 versus the expected hold at 45.2. While the data itself had a relatively low impact, it helped to highlight the increasing likelihood that the European Central Bank (ECB) would accelerate rate cuts to bolster the European economy, even as petrol prices hit their own two-year highs.

Coupled with a Federal Reserve (Fed) that is set to cut rates slower than expected, the interest rate divergence underpinning EUR/USD is set to widen dramatically in the coming months. Some analysts expect the Euro to return to parity against the US Dollar sometime in the next 12 months. 

EUR/USD price forecast

EUR/USD is down 8.82% top-to-bottom from September's peak bids just above the 1.1200 handle, though short-sellers remain unable to pierce 1.0200 for now. A bearish divergence on the Moving Average Convergence-Divergence (MACD) indicator is getting hard to ignore, implying further technical losses on the horizon.

Fiber bids are getting pushed further down by a descending 50-day Exponential Moving Average (EMA) falling into 1.0550. If bidders are able to stage a comeback beyond this point, the 200-day EMA will be waiting just above at 1.0760.

EUR/USD daily chart