EURUSD is moving in a descending channel and the market has rebounded from the lower low area of the channel
#EURUSD Analysis Video
The EUR/USD currency pair has shown some resilience, bouncing back from its early losses. However, concerns over potential US trade tariffs under former President Donald Trump’s policies continue to create uncertainty. While the market remains focused on key economic events, including speeches by ECB President Christine Lagarde and Federal Reserve Chair Jerome Powell, investors are treading cautiously.
Let’s dive deeper into what’s happening and what this could mean for the Euro and the US Dollar.
Trump’s Tariff Threats Stir Market Uncertainty
Over the weekend, Donald Trump reignited trade war fears by threatening to impose 25% tariffs on steel and aluminum imports. This move could have serious economic consequences, particularly for countries that rely heavily on metal exports to the US.
Who Will Be Affected the Most?
If Trump follows through with these tariff hikes, some of the biggest losers could be:
- Canada: The largest supplier of aluminum to the US.
- Mexico, Brazil, Vietnam, and South Korea: Other key exporters of steel and aluminum to the US.
- European Union (EU): The EU charges a 10% import tariff on American automobiles, while US-made cars entering Europe face only a 2.5% duty. This imbalance could lead to further trade tensions between the US and the Eurozone.
The Eurozone is already struggling with economic slowdown concerns, and a trade war with the US could put even more pressure on its currency, the Euro.
Eurozone Struggles with Economic Challenges
Aside from potential trade tensions, the Eurozone is dealing with low inflation and a fragile economic outlook.
ECB’s Stance on Interest Rates
The European Central Bank (ECB) is expected to continue lowering interest rates in an effort to boost economic growth. Some policymakers have even suggested that the ECB may need to cut rates below the so-called neutral rate, as inflation remains below the central bank’s 2% target.
Economists estimate that the ECB’s neutral rate is likely between 1.75% and 2.25%, but if the economy continues to struggle, rates may need to go even lower.
EURUSD is moving in a descending channel and the market has fallen from the lower high area of the channel
ECB President Christine Lagarde is set to speak at the European Parliament, and her comments could provide further insight into the central bank’s next moves. Investors will be paying close attention to any signals about future rate cuts.
The US Dollar Gains Strength Amid Economic Resilience
The US Dollar (USD) remains strong, driven by expectations that the Federal Reserve (Fed) will keep interest rates steady.
Fed’s Interest Rate Outlook
Market analysts now believe that the Fed is likely to hold rates in the 4.25%-4.50% range throughout the year. Initially, many expected a rate cut in early 2025, but stronger-than-expected job data has shifted those expectations.
Key US Economic Data Driving the Market
Recent data from the US labor market has reinforced the Fed’s cautious approach:
- Nonfarm Payrolls (NFP): The US economy added 143,000 jobs in January, which was lower than the previous month’s revised 307,000 but still solid.
- Unemployment Rate: Dropped slightly to 4.0%, improving from the previous 4.1% estimate.
- Average Hourly Earnings: Increased by 4.1% year-over-year, showing wage growth remains strong.
This week, traders will be closely watching the release of US Consumer Price Index (CPI) data and Fed Chair Jerome Powell’s testimony before Congress. These events will provide more clues on where the US economy is headed and whether the Fed is likely to change its policy stance.
What’s Next for EUR/USD?
With trade war fears, central bank decisions, and key economic data releases all in focus, the EUR/USD pair remains highly volatile. Here’s what could impact its movement in the coming days:
1. US Trade Policy Developments
If Trump’s tariff threats escalate, it could hurt global trade and weigh on the Euro, as the Eurozone would face increased costs for exports.
2. ECB’s Monetary Policy Signals
If ECB President Christine Lagarde hints at deeper rate cuts, the Euro could weaken further. However, if she reassures investors about economic stability, the currency could find support.
3. US Inflation Data and Fed Testimony
The US CPI report and Powell’s remarks will be crucial in shaping expectations for Fed policy. If inflation remains stubbornly high, the Fed may delay rate cuts, which could strengthen the USD further.
EURUSD is moving in a descending channel
Final Thoughts
The EUR/USD pair is navigating a tricky landscape, with trade tensions, central bank policies, and economic data all playing a role in its movement. The Euro faces pressure from potential US tariffs and a weaker economic outlook, while the US Dollar is benefitting from strong economic data and steady interest rates.
With several key events lined up this week, market volatility is expected to remain high. Traders and investors will need to stay alert to shifting economic and political developments that could impact currency movements.
Don’t trade all the time, trade forex only at the confirmed trade setups
Get more confirmed trade signals at premium or supreme – Click here to get more signals, 2200%, 800% growth in Real Live USD trading account of our users – click here to see , or If you want to get FREE Trial signals, You can Join FREE Signals Now!
