EUR/USD Holds Steady Amid Trade War Concerns and Fed Policy Uncertainty

EUR/USD Attempts Recovery But Faces Headwinds Below 1.0500

The EUR/USD pair is struggling to gain traction above 1.0500, as escalating global trade tensions and U.S. recession fears weigh on market sentiment. Traders remain cautious, closely watching the impact of President Trump’s tariff policies and the upcoming European Central Bank (ECB) rate decision.

The Euro has managed to hold its ground despite recent volatility, but concerns over tariff implications and geopolitical uncertainties could drive further fluctuations in the coming days.

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EUR/USD Technical Analysis: Key Levels to Watch

📌 Current Price: 1.0521

📊 Resistance Levels:

• 1.0528 – February 26 monthly high
• 1.0532 – Year-to-date high from January 27
• 1.0572 – Fibonacci retracement of September-January decline
• 1.0629 – December 2024 peak

📊 Support Levels:

• 1.0359 – Weekly low from February 28
• 1.0282 – Key support from February 10
• 1.0209 – February 3 low
• 1.0176 – 2025 bottom from January 13

📊 Momentum Indicators:

• RSI near 55 – Suggests slight bullish momentum
• ADX near 12 – Signals weak trend direction

Despite a modest recovery, EUR/USD needs to break above 1.0500 convincingly for further upside momentum. A drop below 1.0359 could trigger a deeper correction.

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Key Market Drivers: Tariff Uncertainty & Economic Data

The EUR/USD pair remains highly sensitive to global trade tensions and shifting monetary policies. Several factors are shaping the market outlook:

1️⃣ Trump’s Tariff Threats & Trade War Impact

📌 President Donald Trump reaffirmed 25% tariffs on imports from Canada and Mexico, which will take effect on March 4. 📌 A new 10% tariff on Chinese imports was announced, doubling the total levy to 20%. 📌 Market concerns have increased, as these trade restrictions could push inflation higher, forcing the Federal Reserve to maintain a hawkish stance.

Tariffs have a dual impact on currencies: While they can strengthen the U.S. dollar by boosting inflation and driving rate hikes, they can also hurt economic growth, leading to a dovish Fed stance in the long run.

2️⃣ Eurozone Economic Outlook & ECB Policy

📌 Eurozone inflation dipped to 2.4% in February, raising expectations of a 25-basis-point rate cut from the ECB on Thursday. 📌 ECB President Christine Lagarde has signaled a cautious approach, rejecting calls for a more aggressive 50-basis-point cut. 📌 The ECB’s monetary policy divergence from the Fed could weaken the euro, making EUR/USD vulnerable to further declines.

3️⃣ Geopolitical Developments: Russia-Ukraine Peace Talks

📌 Over the weekend, discussions on a Russia-Ukraine peace deal lifted risk appetite and provided a temporary boost to the euro. 📌 However, tensions remain high following a tense meeting between Trump and Ukrainian President Zelenskyy.

The geopolitical situation remains fluid, and any negative developments could strengthen the dollar as investors seek safe-haven assets.

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Short-Term Outlook: EUR/USD Stuck in a Tug-of-War

📌 The EUR/USD pair is caught in a battle between trade tensions, central bank policy divergence, and global recession fears.
📌 The U.S. Dollar Index (DXY) remains near 106.50, reflecting ongoing uncertainty.
📌 Traders should closely watch U.S. economic data and Fed statements, as they will dictate the next major move for EUR/USD.

With tariff risks looming and the ECB likely to cut rates, the EUR/USD pair could remain under pressure unless fresh bullish catalysts emerge.

📊 Key Event to Watch: ECB Policy Decision (March 7) A dovish ECB stance could accelerate euro losses, while any hawkish surprises might support a short-term recovery.

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Final Thoughts: Will EUR/USD Hold Above 1.0500?

• Bearish Scenario: If 1.0500 support fails, EUR/USD could slide toward 1.0359 and 1.0282.
• Bullish Scenario: A break above 1.0528 would open the door for 1.0572 and 1.0629 in the near term.

For now, the pair remains in limbo, awaiting trade war updates and ECB policy moves.

👉 Stay tuned to DailyForex.PK for real-time updates on EUR/USD and global market trends! 🚀