Daily Price Outlook
During the European trading session, the EUR/USD currency pair has been flashing green, staying in a bullish range around 1.0329, with an intraday high of 1.0337.
However, it opened lower near 1.0280 due to renewed concerns over tariffs from former US President Donald Trump, which pushed investors toward safe-haven assets like the US dollar.
Despite expectations that the Federal Reserve (Fed) will keep interest rates steady at 4.25%-4.50% for the rest of the year, the US dollar struggled to maintain its gains.
This allowed the EUR/USD pair to recover, as traders saw an opportunity to buy the euro at lower levels. The market remains focused on upcoming economic data and Fed policy signals, which will play a key role in determining the next move for the currency pair.
EUR/USD Gains as US Dollar Weakens Amid Fed Rate Outlook and Job Data
On the US front, the shared currency has been gaining strength as the US dollar weakens, even though the Federal Reserve (Fed) is expected to keep interest rates unchanged at 4.25%-4.50% for the rest of the year.
Experts at Macquarie now believe the Fed will not make any rate cuts in 2025, changing their previous forecast, which predicted a 25 basis points (bps) cut in March or May. This shift comes after the latest US Nonfarm Payrolls (NFP) report for January, which showed stronger job growth than initially expected.
On the data front, the NFP report revealed that the US added 143,000 jobs in January, lower than December’s revised figure of 307,000.
However, analysts noted that recent job data revisions suggest an even stronger labor market trend. Meanwhile, the US unemployment rate dropped slightly to 4% from the previous 4.1%, and wages grew faster than expected, with average hourly earnings increasing by 4.1% annually and 0.5% monthly.
All eyes will be on key US economic data. The Consumer Price Index (CPI) report for January, set for release on Wednesday, will be a major driver for the US dollar.
Meanwhile, investors will closely watch Fed Chair Jerome Powell’s testimony before Congress on Tuesday and Wednesday for insights into future monetary policy.
Euro Struggles Amid US Tariff Threats and ECB Rate Cut Expectations
On the EUR front, the Euro is under pressure due to recent developments in the US. President Trump threatened to impose 25% tariffs on steel and aluminum imports, targeting countries like Canada, Mexico, Brazil, Vietnam, and South Korea. The biggest impact will be on Canada, the largest exporter of aluminum to the US.
The fear is that these tariff actions could lead to reciprocal tariffs from the Eurozone, which already imposes a 10% tariff on US car imports, making it more challenging for the Euro to strengthen against the US dollar.
However, the Euro is already facing challenges due to economic slowdowns in the Eurozone and inflation rates falling short of the European Central Bank's (ECB) 2% target. Analysts at Macquarie have warned that US tariffs could escalate tensions in Europe, further weakening the Euro.
Furthermore, the ECB is expected to continue lowering interest rates, with some policymakers even suggesting the possibility of going below the neutral rate to stimulate the economy. The ECB's neutral rate is predicted to be between 1.75% and 2.25%, which adds to concerns for the Euro’s future performance.
EUR/USD – Technical Analysis
The EUR/USD pair is trading at $1.03197, down 0.01%, as it consolidates within a narrow range following recent volatility.
The 50-day Exponential Moving Average (EMA) at $1.03680 remains a key resistance level, capping upside momentum and reinforcing the broader bearish sentiment. The currency pair remains under pressure, with traders closely monitoring key support and resistance levels to gauge potential breakouts.
The pivot point at $1.02986 serves as an essential level—staying above it keeps bullish momentum in play, while a break below could invite increased selling pressure.
Immediate resistance stands at $1.03520, followed by $1.04092 and $1.04415. A breakout above these levels could signal a shift toward a stronger bullish trend, particularly if the U.S. dollar weakens amid shifting macroeconomic conditions.
On the downside, immediate support is at $1.02467, with further declines targeting $1.02097 and $1.01740. A drop below these levels could intensify selling pressure, reinforcing the prevailing downtrend. However, if EUR/USD maintains strength above $1.02986, buyers could regain control, pushing the pair higher in the short term.
Traders should watch for a potential long position above $1.02986, with a target of $1.03520 and a stop loss at $1.02652. A confirmed break above resistance could lead to extended gains, while a failure to hold support may trigger deeper losses.
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