EUR/USD, Oil Forecasts: Two trades to watch

EUR/USD falls to a 4.5-month low on trade tariff worries

• US trade tariffs could hit Europe’s growth
• German political uncertainty adds pressure to the EUR
• EUR/USD falls to 1.0670

EUR/USD has fallen to its lowest level since late June as investors worry about US tariffs which could hurt the euro area economy and amid ongoing political uncertainty in Germany.

The US dollar has extended last week's gains, trading up at 4 1/2 month highs against its major peers on expectations that the Federal Reserve will cut rates more slowly, given expectations of Donald Trump's inflationary policies.

The market is looking ahead to Fed speakers due this week as well as US CPI data for further clarity over policy.

Meanwhile, the euro is particularly sensitive to the threat of higher US import tariffs, and rumors that Trump is lining up Robert Lighthizer, who is considered a hawk on trade, to run trade policy are hurting the euro. Extensive trade tariffs on the region could hurt fragile economic growth, forcing the ECB to cut rates more quickly to support the economy.

In Germany, Chancellor Olaf Scholz said he will be willing to call a vote of confidence before Christmas, paving the way for snap elections. Policy changes in Germany could lead to looser fiscal policy in the coming year,

EUR/USD forecast – technical analysis

After running into resistance at 1.0940, the 100 SMA, EUR/USD rebounded lower, taking out 1.08 support, the rising trendline dating back to October last year, and 1.07 as the price headed towards 1.0670, the June low. The RSI supports further losses while it remains out of oversold territory.

Any recovery would need to retake 1.07 and 1.0780, the rising trendline resistance, to bring 1.08 back into play.

Oil falls as Hurricane Rafael weakens & China stimulus disappoints

• Oil output is expected to return to normal as Hurricane Rafael weaken
• China’s stimulus announcement fell short of market expectations
• Oil failed at 71.50-72.50 resistance, rebounding lower

Oil prices are falling at the start of the week, giving back modest gains from last week, as supply risks ease owing to hurricane Rafael and as markets were left disappointed by China's stimulus package.

While a significant portion of US output is still offline owing to Hurricane Rafael, the storm is weakening, and production is expected to gradually return to normal.

Meanwhile, China unveiled a $1.4 trillion stimulus program at the end of last week, which fell short of market expectations and raised concerns over the demand outlook in the world's second-largest oil-consuming country.

Oil consumption in China, a country that has been responsible for most of the global demand growth for years, has barely increased in 2024 as economic growth has struggled and gasoline use declined amid the rapid rise of EV vehicles.

Across the week, several events could impact oil prices, including the OPEC and IEA monthly reports due to be released on Tuesday and Thursday, respectively. The October reports showed downward revisions in both price forecasts and demand for crude oil throughout 2025.

The report comes as OPEC has postponed any production increases at its December meeting owing to concerns over supply glut and weak demand.

Oil forecast – technical analysis

Oil prices continue to trade in a holding pattern. After once again failing to retake the 71.50 -72.50 resistance zone, oil prices rebounded lower, dropping below 70.00, bringing 67.5, a level that has offered support on numerous occasions, back into focus.

A break below 67.50 opens the door to 65.25, the September low.

Buyers need to retake 71.50 – 72.50 to extend gains towards 75.00.