EUR/USD kicks off 2025 with a fresh move to the downside

• EUR/USD fell 0.8% on the first trading day of the new year.
• Bearish sentiment looms large over the battered Euro.
• Rate differential set to widen further, analysts expect parity in 2025.

EUR/USD took another leg lower to kick off the 2025 trading season, falling eight-tenths of one percent and tapping the 1.0250 level for the first time since November of 2022, a nearly 26-month low. European Manufacturing Purchasing Managers Index (PMI) data missed the mark on Thursday, only adding to Euro traders' woes following a dovish appearance from European Central Bank (ECB) policymaker Yannis Stournaras later in the day.

According to ECB Governing Council member Yannis Stournaras, the ECB is on pace to trim interest rates in a steady decline through 2025. The ECB is expected to land somewhere in the neighborhood of 2% later this year, according to the ECB's Stournaras. With the Federal Reserve (Fed) on pace to trim interest rates at a much slower pace than previous expected in 2025, the Euro's interest rate differential is set to widen significantly through the rest of the year, which will keep downward pressure on EUR/USD in the long run. This falls in line with expectations from some analysts who are calling for the Euro to hit parity with the Greenback sometime this year.

Pan-European 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, further flummoxing the European economic outlook.

The only meaningful data of note on Friday's economic calendar is US ISM Manufacturing PMI survey results, which are expected to hold steady at a contractionary 48.4 for December.

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