Daily Price Outlook
During the European trading session, the EUR/USD currency pair remained weak around the 1.0402 level, dipping to an intra-day low of 1.0394.
This downward movement is mainly due to the cautious mood in the market ahead of two key events. First, investors are awaiting the U.S.
Federal Reserve's (Fed) monetary policy announcement, expected at 19:00 GMT. The Fed is likely to keep interest rates steady at 4.25%-4.50%, as inflation has slowed but hasn't yet hit the target, and the labor market has stabilized. This uncertainty is keeping the EUR/USD pair under pressure.
Another factor weighing on the Euro is the European Central Bank’s (ECB) meeting scheduled for Thursday. The market has already priced in a 25 basis points (bps) rate cut, lowering the ECB's Deposit Rate to 2.75%.
Traders expect the ECB to continue cutting rates in the future, which would make the Euro less attractive in both the short and long term.
These two factors—the Fed’s cautious stance and the ECB’s expected rate cut—are contributing to the overall bearish sentiment for the EUR/USD pair.
EUR Under Pressure Amid ECB Rate Cuts and Concerns Over U.S. Tariffs
On the EUR front, the shared currency has been under pressure due to the upcoming European Central Bank (ECB) meeting, which is expected to result in a 25 basis point interest rate cut, bringing the Deposit Rate down to 2.75%.
Traders also expect the ECB to continue cutting rates in future meetings. These moves are seen as negative for the Euro in both the short and long term, adding to the cautious mood surrounding the EUR/USD pair.
However, the situation is worsened by concerns about the Eurozone economy, especially with the potential impact of U.S. President Trump’s tariffs.
Germany, the largest economy in the region, is predicted to face another year of economic decline, largely due to ongoing structural weaknesses that the government has failed to address.
The German economy is expected to shrink for the third consecutive year, with industrial growth particularly suffering.
Investors are closely watching ECB President Christine Lagarde’s press conference for more details on how Europe plans to respond to Trump’s tariffs.
Lagarde recently warned at the World Economic Forum that Europe needs to prepare for the possible impact, as Trump's tariffs could target specific sectors.
Analysts are concerned that these tariffs could hurt the Euro, with U.S. Treasury Secretary Scott Bessent proposing a universal 2.5% tariff, which could increase monthly. This raises concerns about the Euro’s potential for growth.
EUR/USD – Technical Analysis
The EUR/USD pair is showing modest gains, trading at $1.04421, up 0.12%, as it attempts to build momentum above key support levels. The price is hovering near the pivot point at $1.04208, signaling potential upside if buyers maintain control.
Technical indicators suggest that short-term bullish sentiment prevails, but the 50-day EMA at $1.04500 remains a key resistance level that must be breached for further gains.
A decisive move above $1.04667 could push EUR/USD toward the next resistance at $1.04990, with an extended rally targeting $1.05334.
However, failure to sustain above the pivot may trigger downside pressure, leading to immediate support at $1.03971, followed by deeper retracement toward $1.03721 and $1.03413.
The broader outlook depends on macroeconomic factors, including U.S. economic data, Federal Reserve policy signals, and European Central Bank rhetoric. If risk sentiment remains positive and the dollar weakens, EUR/USD could attempt a bullish breakout.
Given current price action, a buy position above $1.04208, with a target at $1.04674 and a stop-loss at $1.04015, aligns with the prevailing trend.
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