The EUR/USD exchange rate saw a bullish push early in the week, climbing to a high of 1.0434, before experiencing a slight pullback to trade around 1.0374. This movement aligns with the broader market sentiment, as traders await key macro events, including Donald Trump’s inauguration and the World Economic Forum in Davos.
Despite the recent pullback, EUR/USD remains well above its recent low of 1.0266, suggesting that the pair is still within a near-term bullish structure.
The US dollar’s strength continues to be influenced by expectations surrounding Trump’s policies, which include tax cuts, tariffs, and deregulation, all factors that could drive dollar demand in the coming weeks.
Recent US economic data, including a stronger-than-expected NFP report with 256,000 jobs added and inflation climbing to 2.9%, has fueled speculation that the Federal Reserve may maintain its hawkish stance.
Market participants remain cautious, balancing the Fed’s inflation concerns with potential fiscal stimulus measures under Trump’s administration.
While no major economic data is expected this week, traders will closely watch the upcoming flash PMI readings from both the US and EU, which will provide further insights into economic conditions and potential monetary policy adjustments.
The EUR/USD chart indicates a slight consolidation phase after reaching resistance at 1.0434, with key technical factors to consider.
Picture: Fiber pulls back after testing resistance at 1.0434 with momentum slowing, as seen on the VT Markets app.
Immediate support for EUR/USD is at 1.0350, with stronger protection at 1.0266, aligning with the recent low. On the upside, resistance sits near 1.0434, with further potential toward the 1.0470 50-day moving average if bullish momentum picks up.
However, the MACD indicates slowing bullish momentum, hinting at possible consolidation before the pair makes its next move.
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In the short term, EUR/USD is expected to remain range-bound, with traders monitoring the interplay between US fiscal policy developments and the Fed’s policy outlook. Should Trump’s fiscal policies stoke inflationary pressures, the Fed may maintain higher interest rates, capping EUR/USD gains.
Conversely, if economic data disappoints or geopolitical tensions rise, safe-haven flows into the dollar could weigh further on the pair.
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