Daily Price Outlook
During the early European session on Friday, EUR/USD remained under selling pressure, trading near 1.0390. Despite upbeat German Retail Sales data, the Euro failed to gain support and weakened against the US Dollar.
However, the pair’s decline was mainly driven by a stronger US dollar and ongoing risk-off sentiment in the market.
Stronger US Dollar and Risk-Off Market Sentiment Weigh on EUR/USD
On the US front, the broad-based US Dollar remains strong amid growing concerns over global trade tensions and previously released upbeat US data.
However, Former US President Donald Trump announced on Thursday that 25% tariffs on imports from Canada and Mexico will take effect on March 4. In the meantime, the goods from China will face an additional 10% tariff.
This aggressive stance on tariffs has fueled uncertainty, putting downward pressure on risk-sensitive currencies like the Euro.
On the flip side, the Federal Reserve’s cautious stance on interest rates supports the Greenback. Cleveland Fed President Beth Hammack and Atlanta Fed President Raphael Bostic have both indicated that the US central bank is likely to keep rates on hold for now.
Investors are closely watching the upcoming US Personal Consumption Expenditures (PCE) Price Index report, which could impact Fed policy expectations. Currently, markets anticipate a 68% chance of a rate cut in June, but uncertainty remains high.
EUR Struggles Despite Strong German Retail Sales Amid US Tariff Threats and Fed Caution
On the economic data front, Germany’s Retail Sales data showed a 0.2% month-on-month (MoM) rebound in January, beating the market expectation of 0%. On an annual basis, sales increased by 2.9%, up from 1.8% in December.
However, this positive data failed to provide support for the Euro, as broader market sentiment and USD strength overshadowed the upbeat figures.
Meanwhile, the European economy remains vulnerable amid concerns over US-EU trade relations. Trump’s recent comments about imposing a 25% tariff on European goods add to the pressure on the shared currency.
Therefore, the ongoing geopolitical uncertainties and risk-averse mood in financial markets are limiting the Euro’s possibility for recovery against the USD.
Investors now turn their attention to the US PCE inflation data set to be released later on Friday. Any signs of cooling inflation could weaken the USD, providing some relief for EUR/USD.
However, if inflation remains stubbornly high, it may reinforce the Fed’s cautious stance, keeping the Greenback strong.
EUR/USD – Technical Analysis
EUR/USD is trading at $1.03842, down 0.02%, reflecting a cautious market sentiment as it hovers slightly above the Pivot Point at $1.03805.
The currency pair faces immediate resistance at $1.04063, followed by stronger barriers at $1.04223 and $1.04476. These resistance levels coincide with the 50-day Exponential Moving Average (EMA) at $1.04681, suggesting continued selling pressure unless the pair breaks above this level.
On the downside, immediate support is observed at $1.03556, with further cushions at $1.03326 and $1.03099.
A break below $1.03556 could accelerate the bearish trend, pushing EUR/USD towards the lower support zones.
Conversely, a sustained move above $1.03805 could challenge the $1.04063 resistance level, potentially shifting momentum towards the bulls.
The technical setup indicates a bearish bias as long as EUR/USD trades below the 50 EMA and the Pivot Point. The 4-hour chart shows a descending trendline, reinforcing selling interest. If the price fails to reclaim the $1.03805 level, it is likely to face continued downward pressure.
For now, the recommended strategy is to Buy Above $1.03810, with a Take Profit at $1.04223 and a Stop Loss at $1.03553.
Traders should watch for price action around $1.03805, as a break above this level could invalidate the bearish outlook and trigger a short-term recovery.
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