EUR/USD Attempts Recovery as US Dollar Weakens

Euro Gains Ground but Faces Resistance Amid Tariff Concerns

The EUR/USD pair rebounds to 1.0425 in early European trading on Thursday, benefiting from a weaker US Dollar (USD). However, trade tensions and geopolitical uncertainties continue to limit the euro’s upside potential. The market remains cautious as US President Donald Trump’s tariff stance and ongoing geopolitical tensions could impact risk sentiment.

The Federal Reserve (Fed) and European Central Bank (ECB) are also in focus, with investors awaiting further signals on monetary policy direction. With mixed US economic data and the ECB’s recent rate cut, EUR/USD remains in a delicate balancing act between monetary policy divergence, trade uncertainty, and inflation expectations.

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EUR/USD Technical Analysis – Key Support & Resistance Levels

📊 Technical Indicators Suggest a Cautious Bullish Outlook
✅ EUR/USD remains above the 100-period Exponential Moving Average (EMA), signaling near-term bullish potential.
✅ RSI at 42.85 suggests limited momentum, leaving room for further downside risks.
✅ The pair needs a break above 1.0461 for bullish confirmation.

📈 Resistance Levels to Watch:

• 1.0461 – February 19 high.
• 1.0500 – 1.0505 – Key resistance zone (psychological level & Bollinger Band upper boundary).
• 1.0533 – January 27 high.

📉 Support Levels to Watch:

• 1.0410 – Confluence of 100-period EMA and Bollinger Band lower boundary.
• 1.0352 – February 6 low.
• 1.0285 – February 10 support zone.

📊 Now, let’s analyze EUR/USD’s daily price trend. 📈

Fundamental Overview – Key Market Drivers for EUR/USD

📌 US Dollar Weakness Supports Euro, but Trade Risks Persist

• The US Dollar Index (DXY) has softened, helping EUR/USD recover.
• Geopolitical uncertainty related to the Russia-Ukraine conflict and trade tensions with China continue to impact risk sentiment.
• The Fed’s stance on inflation and potential future rate hikes could influence USD strength in the coming weeks.

📌 US Tariff Uncertainty & Market Impact

• While US tariffs on Canada and Mexico were delayed, the 10% duty on Chinese goods remains in place.
• Trump’s 25% tariff on steel and aluminum imports has raised concerns about a broader trade war.
• If inflation rises due to tariffs, the Fed may delay rate cuts, strengthening the USD.

📌 Diverging Fed & ECB Monetary Policies

• The Fed remains cautious on rate cuts, with officials warning about inflation risks.
• The ECB recently cut rates by 25 basis points, aiming to support eurozone growth while maintaining a gradual approach to monetary easing.
• If inflation expectations rise in the US, the Fed may keep rates higher for longer, potentially limiting EUR/USD gains.

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Conclusion – What’s Next for EUR/USD?

EUR/USD remains at a crossroads between trade tensions, central bank policies, and inflation expectations. Short-term momentum favors a slight recovery, but the USD could regain strength if trade or inflation risks escalate.

💡 Market Outlook:
✅ If EUR/USD breaks 1.0461, the next upside targets are 1.0500 and 1.0533.
✅ If the pair drops below 1.0410, the next support levels are 1.0352 and 1.0285.
✅ Fed comments and ECB policy decisions will be key catalysts for future movement.

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