EURUSD: BUY 1.1200, SL 1.1130, TP 1.1290 | 20 May 2025

EURUSD:

The EUR/USD exchange rate is showing signs of recovery from last session's decline, trading at around 1.1190 during Monday's Asian session. The pair is gaining strength amid pressure on the US dollar after Moody's downgraded the US credit rating by one notch from Aaa to Aa1, citing rising debt levels and the growing burden of interest payments.

This decision follows previous downgrades by Fitch Ratings in 2023 and Standard & Poor's in 2011. By 2035, Moody's predicts that US federal debt will reach approximately 134% of GDP, up from 98% in 2023, and the federal budget deficit will widen to nearly 9% of GDP, driven by higher debt service costs, increased welfare spending and reduced tax revenues.

Despite these concerns, the potential for US dollar losses may be mitigated by a reduction in global trade tensions. The preliminary agreement between the US and China includes plans to reduce tariffs. Washington will reduce duties on Chinese goods from 145% to 30%, while Beijing will reduce duties on Chinese goods from 125% to 10%. Furthermore, market sentiment is bolstered by a resurgence of optimism surrounding the prospect of a nuclear agreement between the US and Iran, as well as impending discussions between US President Donald Trump and Russian President Vladimir Putin with the aim of de-escalating the situation in Ukraine.

Meanwhile, the Euro (EUR) is showing signs of softening amid growing expectations that the European Central Bank (ECB) will make another rate cut at its upcoming meeting. It is becoming increasingly apparent that traders are confident in this outlook. This is due to the fact that they believe eurozone inflation is in line with the ECB's 2% target and the region's economic outlook remains weak amid continued global uncertainty.

Trading recommendation: BUY 1.1200, SL 1.1130, TP 1.1290

Up to $20 for each lot in real money - get a guaranteed income by connecting Cashback promotion!