The Impact of Tariffs on EUR/USD and US Dollar Outlook
- EUR/USD Struggles to Break Psychological Resistance: The EUR/USD pair is facing resistance at 1.0500 amid uncertainty surrounding the US Dollar’s outlook.
- ECB’s Panetta Concerned About Inflation Risks: ECB’s Panetta warns of inflation undershooting the 2% target, adding to economic concerns.
- US Tariffs on Imported Cars: President Trump’s announcement of tariffs on imported cars raises trade tensions and impacts currency markets.
Analysis of Market Developments
The EUR/USD pair is struggling to extend its gains above the key resistance level of 1.0500 as investors weigh the impact of President Trump’s tariffs on the Eurozone. The tariffs on imported cars are expected to hit major exporters like Germany, Japan, and South Korea.
ECB’s Panetta expressed concerns about inflation risks and the potential negative effect of tariffs on the Eurozone’s economy. His dovish monetary policy outlook reflects worries about inflation falling below the 2% target in the medium term.
Key Points to Note:
- The US Dollar Index (DXY) stabilizes near a two-month low, impacting the EUR/USD pair.
- Poor US Retail Sales data for January adds pressure on the US Dollar outlook.
- President Trump’s plans for reciprocal tariffs contribute to market uncertainty.
- Speeches from Federal Reserve officials and economic data will influence the US Dollar’s performance this week.
Technical Analysis of EUR/USD
The EUR/USD pair faces resistance near 1.0500 and holds above the 50-day Exponential Moving Average. The Relative Strength Index (RSI) shows potential for bullish momentum if it sustains above 60.00.
Support levels for the pair are at 1.0285, while resistance lies at 1.0630 for Euro bulls to overcome.
Understanding the US Dollar
The US Dollar is the world’s most traded currency, accounting for over 88% of global foreign exchange turnover. It is influenced by Federal Reserve policies, particularly interest rate adjustments to control inflation and promote full employment.
Key Points About the US Dollar:
- Monetary policy shapes the value of the US Dollar, with interest rate changes impacting its strength.
- Quantitative easing (QE) and quantitative tightening (QT) are tools used by the Federal Reserve to influence the USD value.
- QE leads to a weaker Dollar, while QT can strengthen the currency.