Will the euro perform well against the US dollar in the new year? Will it continue to rise, as it has in recent weeks? The interest rate advantage of the US dollar will decrease in the just-started year 2024, as the US Federal Reserve may lower interest rates again. The European Central Bank, on the other hand, is not quite there yet.

The euro has this tailwind from this side. However, the technical chart only confirms a low potential for further growth in the EUR/USD currency pair. If you want to find out what is in store for us in the new year, it is worth taking a look at the slightly longer course of the course. I have done this for you and you can read the results in the following post.

To begin with, let’s take a look at the long-term chart, specifically the monthly chart from 1978. Before the introduction of the euro, the data of the German mark against the US dollar were used for the calculation. It is easy to see that the brown uptrend, which was broken in 2022, is still being undercut. The gray downtrend, which has been valid since 2008, remains intact, although the currency pair has fought its way back up.

Figure 1: Chart analysis of the euro against the US dollar. The monthly chart is displayed.

Source: TAI-PAN

Counter-movement can offer a nice short opportunity. So, all we can see at the moment is a counter-movement, which is likely to lead the euro to the US dollar to a maximum of 1.1378. This is exactly where the brown and the upper gray trend line meet and form a cross-resistance, which is usually not easily overcome.

The big counter-movement, which started at 0.90 last year, is called „pullback“ in technical chart analysis. It is an opportunity for those traders who missed the break of the brown downtrend line to build a short position. Through the pullback, they can finally open a position in the yellow area if there is another price increase, and then benefit from another long-term price drop.

The fight for the psychological level of 1.10 has been going on for some time now. Many currency traders are still on Christmas vacation, which ends today. So, the currency pair could make another attempt to rise in the next three weeks and possibly break through the light red resistance zone between 1.10 and 1.113.

February shows a seasonal EUR/USD high. Time for this remains until the beginning of February, as the following second figure shows. The seasonality, which you can see as a blue forecast line in the graphic, only announces a trend reversal to the downside from the beginning of February. The data from the last ten years were used for the calculation.

I have marked the time period for a potential high point for you in red. Then it could be worthwhile to open a short position in the euro against the US dollar, protected by a stop above the gray downtrend line. I will keep an eye on the situation for you.

Figure 2: The seasonality of the euro against the US dollar is displayed until the end of September 2024.

Source: TAI-PAN

Conclusion: A look at the long-term price development always shows the overall picture very nicely. This makes it possible to draw different trend lines that are not visible in the short-term chart. This is the case with the brown and gray trend lines for the euro against the US dollar. They show that there is not much room left for further upside and the likelihood of a new downtrend increases seasonally from the beginning of February.

It would not be surprising if the euro against the US dollar soon weakens again and moves towards parity. The seasonal low indicates that this could be the direction from February to July.