14.01.202513:15 Forex Analysis & Reviews: EUR/USD: Analysis and Forecast

Today, the EUR/USD pair shows signs of recovery following an overnight rebound from the 1.0180–1.0175 range, the lowest level since November 2022

The recovery is supported by a modest decline in the US dollar. However, confidence in further growth is lacking due to divergent monetary policy outlooks between the Federal Reserve (Fed) and the European Central Bank (ECB).

According to Bloomberg, economic advisers to President-elect Donald Trump are considering the possibility of gradual monthly tariff increases. This approach aims to strengthen negotiating leverage and prevent a surge in inflation, leading to a slight decline in US Treasury yields and weakening the dollar, which had recently reached a two-year high.

A decrease in concerns over potentially disruptive trade tariffs under Trump's return, along with efforts to bolster stability, has led to positive sentiment in stock markets. This undermines the dollar's position as a safe-haven currency, offering support for EUR/USD recovery. However, the Fed's hawkish December pivot could bolster US Treasury yields and the dollar.

An optimistic Nonfarm Payrolls (NFP) report published on Friday suggests that the Fed may pause its rate-cut cycle this year. Meanwhile, the ECB is expected to continue rate cuts, raising concerns over economic instability in the Eurozone. These factors discourage traders from taking aggressive long positions on the euro, keeping EUR/USD below the 1.0300 psychological level.

For new trading opportunities today, focus on the US Producer Price Index (PPI), which could stimulate demand for the dollar and impact the EUR/USD pair during the North American session. Additionally, attention should be directed to the Consumer Price Index (CPI), scheduled for release on Wednesday, which could influence Fed policy and determine the pair's short-term trajectory.

From a technical perspective, the intraday upward movement is capped by the 100-hour Simple Moving Average (SMA) near the 1.0275 zone. This barrier serves as a pivot point for intraday traders. Sustained strength beyond this level could enable EUR/USD to break the psychological 1.0300 mark near the 200-hour SMA and rise further to an intermediate barrier at 1.0340 before reaching the 1.0400 level on the way to last week's monthly high.

On the other hand, weakness below the daily low of 1.0235 could push EUR/USD towards the 1.0200 level, exposing the two-year low near 1.0175 reached on Monday. Further selling below the two-year low could be seen as a new trigger for bears, paving the way for the extension of the established downtrend observed over the past four months.

Spot prices may then accelerate their decline to challenge the psychological level of 1.0100.