EUR/USD surges past 1.0300 due to dollar weakness: What to expect?
EUR/USD retook the 1.0300 level after the US Dollar fell as the market cheered over the weak US economic data on retail sales and jobless claims. This comes ahead of the inauguration of President-elect Donald Trump, which is increasing market uncertainty amid rumors of possible trade tariff policies. Continuation of diverging monetary policies from the Fed, signaling caution in the rate cuts, and the ECB is set to continue to weigh on the pair. Short-term recovery is possible, but long-term drivers will be a prominent challenge, such as US Dollar strength, geopolitical risks, and weak economic performances in the eurozone, especially Germany. KEY LOOKOUTS • Watch for further weakness in the US Dollar, driven by economic data, Fed policy signals, and Trump’s trade proposals. • The Fed’s cautious rate strategy and ECB’s growth focus create contrasting pressures, influencing EUR/USD’s ability to sustain gains. • Key eurozone figures like inflation and current account data on January 17 could significantly impact EUR/USD’s short-term movement. • Additional risks come from Trump’s trade tariffs and global uncertainties, which could reshape the monetary and economic landscape for EUR/USD. EUR/USD is subject to US Dollar trends, such as economic data, Fed policy changes, and Trump’s trade plans. Diverging monetary policies between the Fed, being cautious, and the ECB, which is focused on growth, will continue to drive the outlook for the pair. Short-term direction may come from eurozone data, such as inflation and current account numbers. Geopolitical uncertainty, such as trade tariffs, may also continue to drive volatility and reshape the economic landscape, which will challenge the sustained recovery of EUR/USD. EUR/USD faces pressures from diverging Fed-ECB policies, with key focus on US Dollar trends, eurozone data, and geopolitical risks, including Trump’s proposed trade tariffs and economic uncertainties. • Disappointing US retail sales, jobless claims, and dovish Fed signals have weighed on the Greenback, allowing EUR/USD to reclaim 1.0300. • The Fed’s cautious approach to rate cuts contrasts with the ECB’s focus on supporting growth, adding pressure on EUR/USD’s recovery. • The threat of President-elect Trump’s reinstatement of trade tariffs will likely increase US inflation and alter monetary policy, which in turn will influence EUR/USD. • Global trade tensions, fiscal policy changes, and eurozone uncertainties, especially in Germany, are major drivers for EUR/USD. • Support is at 1.0176 and parity at 1.0000, while resistance is seen at 1.0436, 1.0506, and the 200-day SMA at 1.0779. • Inflation and current account figures on January 17 will be crucial to determine the state of eurozone’s economy and movement in EUR/USD. • Momentum indicators like RSI and ADX have indicated bearish trends, suggesting that EUR/USD may fail to hold onto gains in this market environment. EUR/USD has managed to recover the 1.0300 level, buoyed by a weaker US Dollar, which was driven by weak economic data, including retail sales and jobless claims, as well as dovish signals from the Federal Reserve. Market sentiment remains cautious ahead of President-elect Donald Trump’s inauguration, with traders concerned about his proposed trade tariffs, which could drive up US inflation and impact monetary policy. Central banks are diverging approaches to make things worse for the pair, with the Fed indicating hesitance on more rate cuts and the European Central Bank maintaining its growth thrust even in the face of rising inflation. These two levels have their support at 1.0176 and resistance at 1.0436-EUR/USD Daily Price Chart. Sources: TradingView, Prepared By ELLYANA Further data releases from the eurozone could include inflation, which will come out on January 17, and current account figures, all helping to provide further clarification regarding the state of the region’s economy as well as touching upon EUR/USD. The overall trend is bearish in the short run with the pair below the 200-day SMA at 1.0779, while further politicized global trade risks and economic woes within Germany further darken the horizon. Indicators like the RSI and ADX, indicating weak short-term prospects of recovery, present challenges in this scenario with regard to how the EUR/USD is expected to move given conflicting monetary policies and economic conditions of uncertainty that surround the market currently. TECHNICAL ANALYSIS In technical analysis, EUR/USD is seen as remaining in a longer-term downtrend while staying below the 200-day SMA at 1.0779. The nearer supports listed are 1.0176, parity at 1.0000, then further down at 0.9935 and 0.9730. These might serve as potential upside targets should the bearish momentum continue. Downside resistance is seen at 1.0436 and 1.0506, the 55-day Simple Moving Average, and at 1.0629, the December peak. Further short-term resistance levels to watch for any recovery attempts occur at 1.0354 and 1.0434. Momentum indicators are the RSI near 41, which states range-bound conditions, and ADX at 35, marking a strengthening of the bearish trend, meaning this pair may lack the strength required to break upward without a robust catalyst. FORECAST EUR/USD stands a chance for upward movement as it breaks over key resistance zones at 1.0436 and 1.0506 or the 55-day SMA. A continued rally might aim for the peak in December at 1.0629 and, with strong enough bullish momentum, even the 200-day SMA at 1.0779. Improving conditions for an uptrend include further US Dollar weakness on disappointing economic data, or dovish comments from the Federal Reserve, or market expectations for less aggressive rate hikes. Additionally, stronger-than-expected eurozone data, such as inflation or current account figures, could boost the Euro, providing short-term recovery opportunities. On the downside, EUR/USD remains under pressure from its broader bearish trend, with support levels at 1.0176, parity at 1.0000, and further down at 0.9935 and 0.9730. An inability to sustain these levels may precipitate further losses, especially with a strengthening US Dollar created by strong economic performance, hawkish Fed surprises, or increased geopolitical risks. The failure of eurozone economies, especially Germany, along with the possibility of global trade tensions and fiscal policy uncertainties, could also weigh significantly on the Euro, where deeper lows for EUR/USD might occur. This might even strengthen bearish sentiment in the short to medium term, as the pair