Recently, while looking at the trend of the euro, I found some interesting logic worth paying attention to. Since last year, the US and Europe have been trading with rate-cut expectations, but the pace has been different—the Federal Reserve has moved faster, causing the euro to rebound after Q4 last year, but it has continued to weaken throughout this year. So, how should we view the euro’s trend in 2024?

I’ve outlined three key factors that affect the euro’s outlook. First is the event factor. The biggest uncertainty in 2024 is the US presidential election, with Trump running again. Looking back at the 2016 election, the euro against the US dollar generally fell before the election; after the ballots were finalized, the decline accelerated, and only in 2017 did it start to rebound. The logic is clear: during the campaign, candidates will paint the US economy in overly optimistic terms, strengthening the dollar; after the election, promises can’t be delivered, so the dollar starts to run out of steam. In addition, on the eurozone side, Bulgaria wants to join the eurozone, but its economic level clearly lags behind—this is also negative for the euro overall.

Next, let’s look at the economic fundamentals. The US economy is indeed more resilient than the eurozone—the eurozone is climbing out of a recession, while the US has not entered a recession at all. On inflation, the US is still higher than the eurozone, which means the Fed’s room to cut rates is limited, keeping US interest rates at a relatively high level. The manufacturing PMI also slightly favors the US. Reuters’ survey shows that most analysts believe the eurozone faces lower inflation risks, suggesting that the ECB may cut rates faster and by a larger margin.

Most importantly, it comes down to the policy timetable of the central banks. It’s expected that the Fed will cut rates by 150 basis points in 2024, while the ECB will only cut by 75. But in terms of timing, the Fed may make its first rate cut as early as March, while the ECB won’t act until June. This creates a situation where the euro may strengthen in the first half of the year. In the second half, as the US election heats up, the market will reprice the dollar, and the euro may face renewed downside pressure.

Based on these analyses, my view on the euro’s outlook is: in the first half, consider going long—the main reason is that the Fed’s rate cuts come ahead of the ECB; in the second half, you should switch to a bearish stance, because expectations and speculation around the US election will lift the dollar. The technical picture also supports this view—weekly charts show clear buy signals, but the monthly chart is more neutral.

As for the specific investment strategy, in the first phase (the first half), focus mainly on going long the euro against the US dollar, because the timing gap in rate cuts can create arbitrage opportunities. In the second phase (the second half), switch to bearish, since competition around the US election will intensify and create overly optimistic sentiment that benefits the dollar. In the third phase (from late this year into early next year), wait for the dust from the election to settle. When the new president’s promises can’t be realized, that’s when you can consider going long the euro again.

If you want to trade EUR/USD but don’t want to trade foreign exchange directly, a contract for difference (CFD) is a good option—it has strong liquidity, flexible leverage, and you can go long or short. Some reputable platforms also offer low barriers and deposits in TWD, which are indeed convenient. If you’re interested, you can look into it yourself.

To summarize, the overall 2024 euro trend forecast is a pattern of rising first and then falling. The key is to adjust your strategy according to the policy pace of the Fed and the ECB and the progress of the US election.