Synopsis:

Bank of America’s quant analysis indicates that EUR/USD’s bearish momentum, highlighted by a recent technical "death-cross" signal, is expected to persist into mid-2025. Historical patterns suggest further downside despite the pair's already significant depreciation since late September.

Key Points:

• Technical "Death-Cross" Formation:

  • A bearish "death-cross" signal was confirmed in late November, marking a continuation of the downtrend in EUR/USD.

• Historical Trend Analysis:

  • EUR/USD tends to be a trend-following pair within G10 FX, meaning momentum often persists rather than reverting to mean levels.
  • When EUR/USD has weakened by 6-7% over an eight-week period, as it has now, the downtrend historically extends.
  • A 26-week horizon after such a selloff typically sees the highest down ratio, with EUR/USD showing a median further loss of 1.8% from current levels.

• Implications for 2025:

  • Quant analysis indicates that the bearish momentum could persist until mid-2025.
  • Until there is a clear reversal, EUR/USD should be approached with a bearish bias.

Conclusion:

BofA's quantitative analysis suggests that EUR/USD's recent selloff is unlikely to reverse in the short term. The technical "death-cross" and historical patterns point to further declines, with the current downtrend potentially lasting into mid-2025. Investors are advised to maintain a bearish outlook on EUR/USD.