EUR/USD held steady above the critical support level of 1.0400 in Wednesday’s European session, maintaining the momentum from a strong recovery seen during North American trading on Tuesday. The currency pair remains resilient as investors await clearer details on the United States’ tariff plans, which will influence market positioning.
In the span of just two days, US President Donald Trump has announced a 25% tariff on goods from Mexico and Canada, and a 10% tariff on Chinese imports, set to take effect on February 1. Trump has also threatened to address trade imbalances with the Eurozone, though specifics remain unclear. On Monday, Trump suggested addressing the imbalance either through higher tariffs or by encouraging Europe to increase its purchases of US oil and gas.
These tariff announcements have been less aggressive than initially feared based on Trump’s election rhetoric, reducing the demand for the US Dollar (USD) as a safe-haven asset. As a result, the US Dollar Index (DXY), which measures the Greenback against six major currencies, has been cautious, trading near its two-week low of 107.90.
Technical Outlook for EUR/USD: Positive Momentum in the Short-Term
EUR/USD is trading close to its two-week high of 1.0430 in the European session, recovering from the over two-year low of 1.0175 reached earlier this month. This recovery has been marked by a divergence in price action and momentum, with the 14-day Relative Strength Index (RSI) forming a higher low while the currency pair made lower lows. A decisive break above the immediate resistance level of 1.0440 would confirm the negative divergence and suggest further bullish momentum.
The near-term outlook for EUR/USD has improved as it trades above the 20-day Exponential Moving Average (EMA) at 1.0358, indicating upward momentum. However, the longer-term outlook remains bearish, as the 200-day EMA, located around 1.0700, continues to slope downward.
Key Support and Resistance Levels
On the downside, the key support zone remains the January 13 low of 1.0175. On the upside, the psychological resistance level of 1.0500 remains a significant barrier for the Euro bulls, marking a critical level for any further advances in the currency pair.
As traders await further developments on US trade policies, the EUR/USD pair will continue to be driven by both geopolitical risks and technical signals in the coming sessions.
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