- Monthly consumer inflation in Germany rose by 0.4%.
- Trump might only impose tariffs on crucial imports.
- The US economy has remained resilient compared to the Eurozone.
The EUR/USD outlook indicates higher-than-expected price pressures in major Eurozone economies that have supported the euro. Meanwhile, the dollar remained vulnerable after reports that Trump might go easy on proposed tariffs.
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The euro rose on Tuesday as market participants lowered expectations for ECB rate cuts due to upbeat inflation figures. Data on Monday revealed that consumer inflation in Germany rose by 0.4%, beating forecasts of a 0.3% increase. Germany is the largest Eurozone economy. Therefore, higher inflation in the country indicates a similar outcome in the bloc.
Consequently, market participants adjusted expectations for European Central Bank rate cuts this year. Nevertheless, the ECB might still ease more than the Federal Reserve. The US economy has remained resilient compared to the Eurozone, which has slowed down significantly. At the same time, Fed policymakers have assumed a more cautious tone, projecting only two rate cuts this year.
Elsewhere, traders continued digesting news on Monday that revealed Trump might only impose tariffs on crucial imports. Therefore, the overall impact might be softer than expected. As a result, the dollar remained fragile while the euro rose.
Initially, the Eurozone was one of the main targets of Trump’s tariffs. Therefore, analysts started forecasting weaker demand for Eurozone goods that would hurt the economy and push the ECB to cut rates aggressively. Therefore, the news came as a relief for the euro.
EUR/USD key events today
- ISM Services PMI
- JOLTS Job Openings
EUR/USD technical outlook: Bulls set sights on the 1.0450 resistance
On the technical side, the EUR/USD price has broken above the 30-SMA, indicating a shift in sentiment from bearish to bullish. At the same time, the RSI trades near the overbought region, showing solid bullish momentum.
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Bears lost control when the price reached the 1.0250 support level. It made a large wick and failed to close below the key level. As a result, bulls emerged and slowly gained momentum to break above the 30-SMA and the 1.0351 resistance level.
However, there is a solid hurdle at the 1.0450 level. If the price breaks above this level, it will confirm the start of a bullish trend. On the other hand, if the level holds firm, bears might resurface to challenge lower support levels.
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