EURUSD Forecast November 2024: Is the Pair Set for a Rebound
In this November 2024 EURUSD forecast, we revisit the pair’s performance since our last analysis in August 2024. Back then, EURUSD was trading between 1.11 and 1.12, and we cautioned against expecting a substantial, quick move higher, pointing to the long-term average level of 1.0734 as a potential anchor.
The past three months have brought significant shifts. EURUSD reached a high of 1.1212 but has since fallen sharply toward the 1.04 level. Below, we analyze the pair’s recent moves with insights and data courtesy of Yahoo Finance.
Again, as in August 2024, we are using a simple 24-month Moving Average along with a 5% standard deviation band (we used a 7% band before). It seems that the spot is very near the current band. Is EURUSD going to continue its downward or rebound move?
Understanding Volatility and EVZ Levels
For some of you who may not be familiar with VIX indexes, we’ll provide a quick explanation. Significant and extreme price movements occur only when EVZ, the EURUSD volatility index, is elevated. In that sense, the move in EURUSD in 2022 from 1.14 to below 1.00 was accompanied by a level of EVZ in excess of its long-term moving average. Considering that the current long-term average of the index is around 7 and the index itself is 5.79, it leads us to draw the only logical conclusion that further moves away from the long-term average for EURUSD of 1.08 are unlikely.
Therefore, we believe that current levels of EURUSD warrant a long position in the pair, long EUR/short USD. We expect the pair to consolidate around 1.04 and return to its long-term average of 1.08 sometime in early 2025.
Factors Behind EURUSD Movements
That leaves one question to answer: why did EURUSD drop in value? EURUSD dropped because the interest rate differential between the two currencies increased. Since 1/10/2024, 1-year German yields have dropped about 0.20%, while those in the US have increased by 0.40%. Considering that the present level of 1-year rates at 4.37% year is unlikely to increase, the only way EURUSD continues to go down is if US rates stay here and German 1-year rates continue to go down much more. In our opinion, that scenario is very unlikely, and the evidence of that is the subdued levels of the EVZ index.