FX.co ★ absh kaat | EUR/JPY

I am closely monitoring the EUR/USD pair as it hovers around 1.08 following the latest U.S. trade policy actions. With President Trump imposing auto tariffs while keeping a flexible stance on reciprocal measures, I see potential volatility ahead. I recognize that tariffs can have a complex impact on the market, strengthening the dollar by reducing import demand and raising inflation pressures. However, I also understand that recession fears could counteract this effect, making the outlook for USD strength uncertain. I take note of Danske Bank's analysis, which suggests that aggressive tariff policies have historically led to mixed FX reactions. If markets perceive a sharp economic slowdown, I expect investors to shift toward safe-haven assets like the USD, though a dovish response from the Federal Reserve could weaken the dollar instead. I believe that key macroeconomic data will be crucial in shaping the EUR/USD direction. I will pay close attention to U.S. inflation reports, labor market data, and the Federal Reserve’s rate guidance to assess the dollar’s trajectory. At the same time, I will track European indicators such as PMI readings and ECB policy signals to gauge euro strength. If the Federal Reserve signals rate cuts to counteract a trade-induced slowdown, I anticipate dollar weakness, which could drive EUR/USD higher. Technically, I see the pair consolidating within the 1.08-1.09 range, with major resistance at 1.0920 and 1.10. A breakout above these levels could lead to further gains toward 1.1050. On the downside, I identify support at 1.0750, and a breakdown below this level could expose 1.0650. Given these factors, I remain cautious yet adaptable, watching for confirmation signals before making my next trading decisions.

I am carefully analyzing the market’s expectations of four consecutive 25 basis point (bps) interest rate cuts by the European Central Bank (ECB) in its upcoming meetings. I take note of Governor Yannis Stournaras' stance that these cuts should proceed gradually, aiming for a 2% inflation target by the end of 2025. I acknowledge that the possibility of US tariff hikes could accelerate the ECB’s easing cycle, increasing pressure on the Eurozone economy. I see that EU ministers are opting to focus on strengthening competitiveness and capital markets rather than engaging in retaliatory measures. I find ECB President Christine Lagarde’s comments at the World Economic Forum significant, as she highlights that Europe must brace for potential tariffs, which are expected to be more selective rather than broad-based. I recognize that, despite these economic headwinds, the Euro has recently shown some signs of recovery, but I remain cautious about its long-term trajectory. I believe that the combination of ECB rate cuts and trade tensions introduces a complex dynamic, where monetary easing might support economic stability but could also weigh on the Euro. I expect the market to closely follow upcoming ECB statements and inflation data, as any shift in policy stance could significantly impact EUR/USD movements. I remain focused on these developments, knowing that both fundamental and technical factors will shape the Euro’s direction in the coming months.