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EUR/USD Outlook to Reach $1. 10 Still Feasible
The EUR/USD pair has seen a slight decline over the last five sessions, losing some strength after experiencing one of its most substantial surges earlier this month. The current attention is on the ongoing trade tensions, with updates indicating that Trump’s tariffs may be more specific than previously anticipated, which has lessened the demand for safe-haven currencies. Earlier this week, Trump indicated that he would announce new tariffs on car imports soon but mentioned that some countries might receive exemptions from the forthcoming “reciprocal” tariffs. The uncertainty around these tariffs leaves the short-term direction of EUR/USD unclear; however, I still hold a positive outlook for the pair, especially in light of Germany’s significant fiscal change approved last week and the recent downturn in US economic data.
Key US Economic Indicators in Focus
The U. S. Dollar Index has had an unstable beginning to the week after finishing the previous one slightly higher, as it stabilized following a lackluster performance in prior weeks. The dollar’s weakness is highlighted by mixed-to-weak economic data and a somewhat dovish Federal Reserve. Although Chair Jerome Powell eased market concerns last week by downplaying inflation risks associated with tariffs, the University of Michigan’s inflation expectations survey has raised some alarms. Nevertheless, Powell regarded these concerns as temporary issues, indicating that any inflation from tariffs may not last.
However, signs of an economic downturn are starting to show. The ongoing risks from the trade war and persistent inflation concerns continue to impact consumer and business confidence. Yesterday, the CB consumer confidence index fell to its lowest point in four years, dampening hopes for an end to the conflict in Ukraine, where Russia and Ukraine agreed on a ceasefire in the Black Sea. Additionally, the Philly Fed non-manufacturing index saw a significant drop to -32. 5, compared to the anticipated -13. 1. The Richmond Manufacturing Index did not perform well either, coming in at -4 against the expected +8. At the same time, New Home Sales recorded 676K, slightly below the forecast of 682K annualized units.
Looking ahead, today’s important economic reports include Durable Goods Orders, while Thursday will present Unemployment Claims, the Final estimate for Q4 GDP, and Pending Home Sales. Yet, the release of Core PCE data on Friday will be the highlight. As the Fed’s preferred measure of inflation, a consistent +0. 3% month-over-month increase would elevate the annual rate to 2. 7% from 2. 6%, testing Powell’s position that inflationary pressures are kept in check.
EUR/USD Stuck Between Germany’s Fiscal Measures and US Tariffs Uncertainty
The uncertainty around the tariffs scheduled for April 2 is currently restraining the euro. Just yesterday, Trump stated that new tariffs on car imports would be announced in the near future, contributing to the unpredictability related to the comprehensive levies set to begin on April 2. While it is anticipated that certain countries will receive exemptions from the “reciprocal” tariffs, the markets are adopting a wait-and-see approach. If Trump implements broad tariffs, it is likely to influence the EUR/USD negatively in the near term.
That being said, the euro is expected to attract buyers during any brief declines, thanks to the significant spending plan from Germany that was approved last week. The €500 billion stimulus package marks a significant shift from Berlin’s usual conservative approach to fiscal policy and aims to stimulate the economy and enhance defense spending. This groundbreaking decision might strengthen Germany’s GDP and create slight inflationary pressures, both of which could support the EUR/USD outlook in the medium term.
From a technical viewpoint, the EUR/USD pair lost some value last week but is still close to the important 1. 0800 mark, keeping a rise to 1. 10 achievable. The bulls need to protect this area to keep the upward trend going. However, a clear move downward could highlight support levels at 1. 0730 (the 200-day moving average), then 1. 0700 and 1. 0630. On the higher side, resistance is found at 1. 0900 and 1. 0950, with the critical psychological barrier of 1. 1000 being a significant challenge. The next few sessions could reveal if the pair continues its upward trend or if it goes through a more significant correction, as the rates seem to be consolidating in what appears to be a bullish continuation pattern (descending triangle).
