Bearish view

• Sell the EUR/USD pair and set a take-profit at 1.0215.
• Add a stop-loss at 1.0400.
• Timeline: 1-2 days.

Bullish view

• Set a buy-stop at 1.0325 and a take-profit at 1.0400.
• Add a stop-loss at 1.0215.

The EUR/USD pair remained under pressure overnight as concerns about trade continued ahead of the upcoming Jerome Powell statement. The pair dropped to the important support at 1.0300, its lowest swing since Thursday.

Jerome Powell and US inflation data

The EUR/USD exchange rate retreated as geopolitical risks rose. In the Middle East, Hamas suspended hostage releases, accusing Israel of reneging parts of the deal. The key concern is a recent statement by Donald Trump that he will seek to occupy Gaza after the war ends.

Therefore, there are fears that the Middle East will remain in a crisis for a while, which explains why the price of crude oil has risen lately. Higher oil prices may lead to stubbornly higher consumer prices in the US and other countries.

The EUR/USD pair also dropped after Trump threatened a 25% tariff on steel and aluminium from other countries. These tarffs will affect many countries in the European Union like Germany and France. Germany sells steel worth over $2.9 billion a year.

The affected countries will likely retaliate and impose tariffs on goods from the United States, disrupting the ongoing recovery.

Europe is also anticipating more tariffs from the US. Donald Trump has constantly accused the European Union for stealing from the US because of the large trade deficit. As such, he believes that implementing tariffs will push more European companies to set up operations in the US.

The EUR/USD pair will react to the upcoming statement by Jerome Powell, the head of the Federal Reserve. He will testify before Congress and provide hints on what to expect in the coming meetings. Economists expect the Fed to maintain high rates and then start to cut later ths year. The US will also release the closely-watched inflation data on Wednesday.

EUR/USD technical analysis

The daily chart shows that the EUR/USD pair has pulled back sharply in the past few days. It has moved below the support at 1.0450, its lowest swing in October 2023. The pair has also dropped below the key point at 1.0535, its highest level this year.

It has dropped below the 50-day moving average, and the Ichimoku indicator. It also moved below the Woodie pivot point. Therefore, the pair will likely remain under pressure in the coming days as sellers target the key support at 1.0215. A move above the resistance point at 1.0400 will invalidate the bearish view.

More By This Author: