- The Euro has recently shown strength against the US Dollar, with the EUR/USD pair reaching a resistance level of 1.0515, the highest level for the currency pair in two weeks, and around which it has been stable at the beginning of this week's trading.
- The rebound gains came as the weaker-than-expected US retail sales report increased hopes that the Federal Reserve will be able to cut US interest rates later this year despite ongoing inflation concerns.
According to the economic calendar, the data revealed a sharp 0.9% decline in US retail sales for January, much worse than the expected 0.1% decline, as severe winter weather and wildfires disrupted consumer spending. On the other hand, traders assessed the impact of US President Trump's trade policies and ongoing geopolitical developments. Trump announced plans for country-specific reciprocal tariffs, set to take effect in early April, although financial markets remain cautiously optimistic that negotiations may avoid their full implementation.
Additionally, diplomatic efforts to end the war in Ukraine continued in Munich, where Trump pledged to accelerate peace talks after discussions with Russian President Putin and Ukrainian President Zelensky.
Overall, there is no doubt that tariffs will hurt the eurozone more than Britain due to the large trade surplus in goods that European countries maintain with the United States. This should support the pound against the euro in the future to the extent that tariffs remain a major concern for the foreign exchange markets.
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Trading Tips:
The rebound gains for the Euro against the Dollar remain cautious and susceptible to a rapid collapse. Therefore, carefully monitor the gain factors and their sustainability, and consider selling as the stronger trading direction for the pair.
The Most Prominent Factors Affecting Euro/Dollar:
In the forex market this week, traders will be closely watching the Federal Open Market Committee (FOMC) minutes and statements from several Federal Reserve officials for insights into the outlook for the central bank's policy. On the economic data front, S&P Global's Purchasing Managers' Indexes (PMIs) will provide an early glimpse of February's economic activity, along with key regional indicators. The Empire State Manufacturing Index is expected to show a much smaller contraction in New York State's manufacturing sector, while the Philadelphia Fed manufacturing index is likely to decline from its 2021 highs.
Housing-related reports, including the NAHB Housing Market Index, building permits, housing starts, and existing home sales, will also be closely watched, with most indicators pointing to a slowdown in the housing market. Moreover, the Final figures from the US Michigan Consumer Confidence Index are also due.
In contrast, preliminary PMIs for the Eurozone, Germany, and France will be in the spotlight, with the services sector expected to expand slightly faster and manufacturing to contract less. In addition, the German ZEW index is expected to show an improvement in investor sentiment in February. The Eurozone will also release its preliminary consumer survey, while France will publish its business survey. Other key data releases include trade balances for the Eurozone, Italy and Spain, producer prices for Germany, and final inflation figures for France and Italy.
EUR/USD Technical Analysis Today:
According to the daily chart, the Euro/Dollar (EUR/USD) pair still maintains a bearish bias. For the bulls to break this trend, the pair must first move towards the resistance levels of 1.0550 and 1.0640. Conversely, on the same timeframe, bullish hopes will evaporate if the Euro/Dollar returns to the support level of 1.0330. The Euro/Dollar will remain in tight ranges until it reacts to the important US and European economic data releases this week, as well as any announcements from the US government regarding tariffs.
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