Bullish View
- Buy the EUR/USD pair and set a take-profit at 1.0500.
- Add a stop-loss at 1.0250.
- Timeline: 1-2 days.
Bearish View
- Sell the EUR/USD pair and set a take-profit at 1.0250.
- Add a stop-loss at 1.0500.
The EUR/USD exchange rate rose as the US dollar index dropped by over 1%. It rose to a high of 1.0430, its highest swing since January 7, and about 2.45% from its lowest level this month. So, what next for the euro after Donald Trump’s inauguration?
The EUR/USD pair rose to its highest swing in over two weeks, rebounding as the US dollar index dropped by over 1% to $108.25. The dollar slipped after Donald Trump stuck a conciliatory tone after he was sworn in as the 47th president of the United States.
He delayed his planned tariffs against key countries like China and other countries like Mexico and the European Union. His moderate tone led to a risk-on sentiment among investors, including in US equities, which bounced back. The Dow Jones and the Nasdaq 100 indices jumped by 170 and 250 points.
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The EUR/USD pair has been in a strong downtrend as investors anticipate a potential divergence between the Federal Reserve and the European Central Bank (ECB). Most analysts anticipate that the ECB will continue cutting interest rates, while the Fed has hinted that it will be more gradual.
Data released last week supported this view since US inflation remained substantially higher than the 2% target. The headline Consumer Price Index (CPI) rose from 2.7% to 2.9% in December, while the core CPI moved to 3.2%.
EUR/USD technical analysis
The EUR/USD pair bottomed at 1.0155 earlier this month as the US dollar index rebounded. On January 13, it formed a doji candle, which is a candlestick with a small body and upper and lower shadows. A doji is a sign that the price opened and closed at the same point.
The pair has moved above the descending channel and has risen above the upper side of the channel. Also, the MACD and the Relative Strength Index (RSI) indicators have formed a bullish divergence pattern.
The pair has moved to the weak, stop & reverse point at 10376. Therefore, the pair will likely continue rising as bulls target the next key point at 1.0500, which coincides with the strong, pivot, reverse level. A drop below the ultimate support at 1.0253 will invalidate the bullish view.
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