- The euro wallowed near a seven-month low on Tuesday.
- Trump will likely impose higher tariffs on goods imported from the Eurozone.
- Market participants await the October US inflation figures.
The EUR/USD outlook shows a steep decline as the euro suffers at the prospect of higher import tariffs in the US. Meanwhile, the dollar soared as Trump’s win painted a bright outlook for the US economy, reducing Fed rate cut expectations.
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The euro wallowed near a seven-month low as investors sold the currency after Trump’s presidential win. Trump will likely impose higher tariffs on goods imported from the Eurozone. Such an outcome will significantly hurt the Eurozone economy.
On the other hand, it will boost the US economy as local businesses will flourish. At the same time, Trump’s proposal for more significant tax cuts will improve business conditions. A more robust economy will translate to higher inflation. The Federal Reserve recently pivoted from rate hikes to rate cuts.
The US Central Bank increased interest rates to bring down sky-high inflation. Although price pressures have eased significantly from the peaks, the journey is not yet over. Inflation remains above the Fed’s 2% target. Nevertheless, policymakers voted to start slashing rates because all indicators showed that inflation was in a downtrend and would soon hit the target.
Unfortunately, that outlook might have changed with Trump’s win. Now, there is a chance that inflation will start increasing before it reaches the target. Consequently, the Fed might become more cautious about rate cuts.
Meanwhile, market participants await the October US inflation figures for more clues on whether the Fed will cut in December. Traders currently price a lower 69% chance of a December rate cut.
EUR/USD key events today
Neither the US nor the Eurozone will release high-impact economic reports. Therefore, markets will keep digesting Trump’s win.
EUR/USD technical outlook: Bears eye 1.0600 support in new downtrend
On the technical side, the EUR/USD price has collapsed below the 1.0700 support to make a new low in the downtrend. Consequently, the bearish bias has strengthened since there is a lower high and low. At the same time, the price respects the 30-SMA as resistance, and the RSI is in the oversold region, suggesting solid bearish momentum.
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The trend shifted when the price made a strong evening star candlestick pattern. If the new trend continues, EUR/USD will soon break below the 1.0600 support level.
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