EURUSD Technical Analysis – The greenback stays on the backfoot

Fundamental
Overview

The USD continues to be
under pressure as the positive tariffs talks on Monday eased the trade war
fears and weighed on the greenback. In fact, trade war fears have been the only
thing keeping the bid under the USD as interest rate expectations and economic
data took the second place in importance.

As a reminder, the
repricing in rate cuts expectations reached the peak after the last US NFP
report and then the market returned into a dovish pricing following the benign
US inflation data (the market is still pricing roughly two rate cuts for 2025).

Today, we get the January
NFP and it could be another good report. That might lead to a short-term relief
rally for the US Dollar but as we’ve seen with the US Job Openings data, the
labour market continues to normalise and it’s not a source of inflationary
pressures anymore. So, the potential US Dollar rally might be faded.

That doesn’t mean that the
Fed will cut more than the two times projected for this year, but it also
doesn’t call for a more hawkish repricing yet. So, the path of least resistance
for the US Dollar (barring negative tariffs outcomes) might remain to the
downside as a more dovish path going forward looks more probable.

On the EUR side, the ECB
recently cut
interest rates by 25 bps as expected and overall we didn’t get anything new
from the event as the central bank remains data dependent regarding the pace
and magnitude of cuts The latest PMIs showed an encouraging rebound in activity and the
news of a peace deal in the Russia-Ukraine war started to gather momentum. That
should be positive for the economy.

EURUSD Technical
Analysis – Daily Timeframe

On the daily chart, we can
see that EURUSD opened lower on Monday following the tariffs over the weekend
but eventually bounced back strongly as positive talks led to an easing in
trade war fears. The price is now trading between the 1.0344 support
and the 1.0447 resistance. The buyers will look for a break higher to extend
the rally into the 1.06 handle, while the sellers will look for a break lower
to target the 1.0222 level next.

EURUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see more clearly the recent price action and the trading between the key
levels. There’s not much we can add here as buyers and sellers will lean into
those key levels or look for breakouts.

EURUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have a minor intraday resistance around the 1.04 handle. From a
risk management perspective, it would be much better to wait for the US NFP
report as any technical setup can be invalidated in a blink of an eye when the
data gets released. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we conclude the week with the US NFP
report.