Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.0400.
- Add a stop-loss at 1.0180.
- Timeline: 1-2 days.
Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0180.
- Add a stop-loss at 1.0400.
The EUR/USD exchange rate stabilized as the tensions on tariffs reduced and after the relatively strong European inflation data. It also stabilized after the strong US economic data released on Monday. It rose to a high of 1.0325, up by 1.25% from its lowest point this week.
Tariff tensions ease
The EUR/USD pair crashed on Monday after Trump unveiled a set of tariffs on Canadian, Mexican, and Chinese goods. These tariffs, which affect goods worth almost $2 trillion a year, could slow the global economy and lead to a higher US inflation rate.
The pair wavered after Donald Trump paused tariffs on Mexico, the biggest trading partner for one month. He expects the two countries to reach a deal that will improve trade and immigration issues.
There is a chance that Trump will use the threat of tariffs to negotiate better agreements than he did in the first term. This explains why the EUR/USD retreat was more muted and why it then stabilized during the American session.
The pair also stabilized after the Eurostat published a strong inflation report. It showed that the headline Consumer Price Index (CPI) rose from 2.4% in December to 2.5% in January, higher than the median estimate of 2.4%. Core inflation remained at 2.7%, also higher than the expected 2.6%.
Another report showed that the US economy did well in January. The ISM manufacturing PMI rose from 49.2 in December to 50.9 in January, crossing the expansion zone for the first time in months. The S&P manufacturing PMI also jumped from 49.4 to 51.2, also higher than the expected 50.1.
The next key EUR/USD news will be the upcoming US JOLTS job vacancies data, which will come a few days before the official NFP data.
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EUR/USD technical analysis
The EUR/USD exchange rate retreated sharply on Monday and settled at a low of 1.0210, its lowest swing on January 13. It has remained below the key support level at 1.0450, its lowest swing in October 2023.
The pair is hovering at the ultimate support of the Murrey Math Lines and slightly below the 50-day and 25-day Exponential Moving Average (EMA).
There are signs that the EUR/USD exchange rate is about to form a double-bottom pattern, a popular bullish reversal sign. Therefore, the pair will likely bounce back as the tariff tensions start to ease. If this happens, the next level to watch will be at 1.0400.
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