Technical Analysis

EUR/USD Price Analysis – Feb 03, 2025

By LHFX Technical Analysis
Feb 3, 20253 min
Eurusd

Daily Price Outlook

During the European trading session, the EUR/USD currency pair experienced downward trend, driven by the strength of the US Dollar.

The demand for the US Dollar as a safe-haven asset surged significantly following US President Donald Trump's escalating trade war rhetoric.

The US Dollar Index (DXY), which measures the Greenback's value against six major currencies, surged above the 109.50 mark. As a result, EUR/USD dropped over 1%, reaching near 1.0230 at the start of the week.

Moreover, the losses in the EUR/USD pair were further bolstered by the President Trump reiterated his threats to impose tariffs on the European Union (EU).

Over the weekend, Trump had already slapped 25% tariffs on Canada and Mexico, along with 10% tariffs on China.

He also warned of potential tariff hikes on the EU, although he did not provide further details. This uncertainty surrounding trade policies put additional pressure on the EUR/USD pair.

Trump's Tariff Threats and Economic Slowdown Pressure on EUR/USD

President Trump has once again threatened to impose tariffs on the European Union (EU), intensifying trade tensions. Over the weekend, he announced 25% tariffs on Canada and Mexico and 10% on China.

Trump further warned that similar measures could be applied to the EU, claiming that the region has “taken advantage” of the US by not buying enough American goods. He emphasized that the EU benefits more from trade with the US than vice versa, adding to concerns over the EUR/USD pair.

However, the possibility of tariffs on the Eurozone comes at a challenging time for the region. The Eurozone economy is already showing signs of slowdown, with preliminary GDP data for Q4 2024 showing no growth, following a 0.4% expansion in Q3.

Germany, the Eurozone’s largest economy, contracted by 0.2% year-over-year in Q4, highlighting the weakness. The threat of tariffs could make matters worse, putting more pressure on the euro and pushing the EUR/USD lower.

In response to these economic challenges, the European Central Bank (ECB) has been lowering interest rates. Last Thursday, it cut the Deposit Facility rate to 2.75% and signaled a clear path for further cuts.

Traders expect the ECB to make three more rate cuts by the summer. Meanwhile, inflation data from January showed mixed results, adding uncertainty to the Eurozone’s economic outlook, further weighing on the EUR/USD pair.

EUR/USD Price Chart - Source: Tradingview
EUR/USD Price Chart - Source: Tradingview

EUR/USD – Technical Analysis

The EUR/USD pair is trading at $1.02379, up 1.14%, reflecting renewed bullish momentum after breaking past key technical levels. The currency pair is currently hovering just above its pivot point at $1.02375, a critical level that could dictate the near-term trend.

Despite this upside movement, EUR/USD remains below its 50-day Exponential Moving Average (EMA) at $1.04228, suggesting that the broader trend is still under pressure unless a decisive breakout occurs.

If bullish sentiment persists, the next immediate resistance lies at $1.02917, a key hurdle that, if breached, could open the door towards $1.03516 and potentially $1.04340.

On the flip side, failure to sustain above the pivot point may trigger a pullback toward immediate support at $1.01770. Further downside risks include targets at $1.01249 and $1.00826, where buying interest could re-emerge.

The technical setup favors a cautiously bullish outlook above $1.02179, with an entry suggested at this level. A take-profit target is set at $1.02917, capturing potential gains from continued upward momentum, while a stop-loss at $1.01685 helps limit downside risks.

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EUR/USD

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