- European Central Bank policymakers showed their support for more rate cuts in 2025.
- Market participants are fully pricing an ECB rate cut next week.
- Trump has hinted at a 10% universal tariff that would affect goods from the Eurozone.
The EUR/USD outlook shows growing support among ECB policymakers for more rate cuts this year, weighing on the euro. Meanwhile, the dollar paused its rally as market participants prepared for the Federal Reserve policy meeting.
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On Wednesday, European Central Bank policymakers, including Lagarde, showed their support for more rate cuts in 2025. The central bank has already implemented four cuts, and markets are pricing four more this year. Moreover, they are fully pricing a rate cut next week. There was some relief when Trump failed to immediately implement tariffs on his first day in office. However, he plans to impose them sometime during the first quarter.
Tariffs on imports from the Eurozone would hurt the already weak economy. Therefore, it would push the ECB to lower borrowing costs faster. Trump has threatened a 25% tariff on Mexico and Canada. Meanwhile, he has hinted at a 10% universal tariff that would affect goods from the Eurozone.
The greenback strengthened slightly on Thursday as traders digested Trump’s tariff plans. Meanwhile, there was some caution before next week’s Fed policy meeting. Economists expect the central bank to keep interest rates unchanged. At the same time, policymakers might give clues on the outlook for 2025. A hawkish tone will support the dollar and hurt the euro. On the other hand, if policymakers suggest more rate cuts than expected, the dollar might collapse.
EUR/USD key events today
- US unemployment claims
- President Trump speaks
EUR/USD technical outlook: Price retreats after testing channel resistance
On the technical side, the EUR/USD price is retreating after meeting the 1.0450 resistance level. However, the bias is bullish since the price trades above the 30-SMA, with the RSI in bullish territory. At the same time, the price trades in a bullish channel. It recently touched the channel resistance before turning south.
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Meanwhile, although the price made a higher high, the RSI trended down, indicating a bearish divergence. Therefore, bears might be ready to push the price down to the 1.0350 level and the channel support.
Nevertheless, the uptrend will continue if the price stays within the channel. On the other hand, sentiment will shift to bearish if the price breaks below the channel support.
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