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For two consecutive days, the EUR/USD currency pair has been trying to recover from its lowest levels in three weeks, with losses reaching the support level of 1.0211. The upward rebound gains have not exceeded the resistance level of 1.0409, which is stable near it at the time of writing this analysis. The movement may remain within a limited range until financial markets and investors react to the announcement of US jobs figures and the fate of the tariffs imposed by the new US administration.
US Tariff Policy Harms the Euro
According to
Forex market trading, traders have remained cautious amid rising trade tensions. While US President Trump has postponed the planned 25% tariffs on Mexico and Canada for a month in exchange for commitments to reduce immigration and drug trafficking at the border, the 10% US tariff on Chinese imports has come into effect, prompting Beijing to retaliate immediately. Despite these tensions, investors remain optimistic that an upcoming phone call between Trump and President Xi could ease hostilities and possibly lead to the cancellation of tariffs.
However, uncertainty has persisted, along with the European Central Bank's dovish stance and the possibility of further rate cuts, putting pressure on the Euro. Recently, the European Central Bank cut interest rates by 25 basis points as expected. On the economic front, new data showed that inflation in the Eurozone rose to 2.5% in January, the highest since July 2024 and above expectations of 2.4%. The core inflation rate remained stable at 2.7%, defying expectations of a slight decline to 2.6%.
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Be careful because the euro's gains are vulnerable to a rapid collapse as long as the eurozone economy suffers from the effects of Trump's trade wars and at the same time the US dollar benefits from its safe haven appeal did the Euro-Dollar price rise recently?
According to performance data from licensed currency trading platforms, the EUR/USD pair received a boost from weaker-than-expected US job vacancies data and factory orders, which seemed to revive expectations of easing US Federal Reserve policies. Meanwhile, the upcoming Challenger job cuts report and initial jobless claims could determine the direction of the US dollar later today. Overall, weaker-than-expected data may undermine US non-farm payroll forecasts and push traders to price in more US interest rate cuts by the Federal Open Market Committee (FOMC) later this year, despite the recent shift by the US central bank to a less dovish stance.
On the other hand, strong US jobs data could reinforce the Fed's bullish outlook and dampen easing expectations, leading to a stronger US dollar. Especially, if safe-haven flows continue to rise due to uncertainty related to tariffs.
EURUSD Chart by TradingViewEUR/USD Technical Analysis Today:
According to recent trades, the EUR/USD pair may be on the verge of a significant reversal, as a double bottom pattern can be seen on the 4-hour timeframe chart. The price has failed in its recent attempts to break below the key psychological level of 1.0200 but has not yet tested the neckline resistance at 1.0500. The 100-day simple moving average is crossing above the 200-day simple moving average, indicating that the downward momentum is fading, and bulls are about to take control of the performance. Also, the price seems to be trying to close above the pivot points as an early sign of bullish momentum.
Therefore, moving above the neckline resistance could trigger an upward wave with the same height as the chart formation or about 300 pips. On the other hand, if the resistance does not hold, the EUR/USD pair may move back to lower levels.
At the same time, the Stochastic indicator is moving upwards, indicating that buyers are in control, but the oscillator is also approaching overbought levels, signalling that exhaustion is near. Technically, a shift downward may indicate that buyers are regaining control. The Relative Strength Index has more room to move upwards before reaching the overbought zone, signalling exhaustion among bulls, so the uptrend may continue until that happens.
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