Article by: ETO Markets
In this week's Eurozone update, the Euro (EUR) retreated from a six-week high against the US Dollar (USD) as the Dollar gained strength amid rising US yields and headlines surrounding former President Trump’s potential trade tariffs. Weaker-than-expected US economic data and dovish comments from FOMC Governor Christopher Waller, who hinted at possible rate cuts, heightened market caution ahead of the Federal Reserve's January 28–29 meeting, where an on-hold decision is widely expected. In the US, optimism about a stable Fed was tempered by concerns over inflation and a softening labour market. Meanwhile, in Europe, the ECB signalled further rate cuts to address weak growth and inflation. However, uncertainties around US trade policies, diverging monetary stances, and economic challenges in the eurozone, particularly in Germany, continue to pose significant hurdles for the Euro’s sustained recovery.
Meanwhile, in the Pacific Region, the Australian Dollar (AUD) maintained gains recovering from recent pressure due to a strong USD driven by the “Trump trade” narrative. The AUD’s recovery was supported by a weaker USD, stable commodity prices, and stronger-than-expected December employment data, although domestic challenges persist, including slowing economic momentum, weak confidence, and concerns over China’s recovery. The Reserve Bank of Australia (RBA) remains cautious, holding rates at 4.35% in December but signalling the possibility of a February rate cut to address softer inflation and growth. Looking ahead, key Australian economic data, including business confidence and inflation figures, may shape the AUD/USD pair's trajectory, especially amid potential shifts in Federal Reserve policy.
The EUR/USD pair trades near … with mild losses during Thursday's Asian session, as the Euro weakens amid US President Trump’s threats of imposing tariffs on the Eurozone and concerns over the region’s economic slowdown. While the European Commission is set to release its Consumer Confidence report for January, the US will publish Initial Jobless Claims, both of which could influence the pair. Analysts suggest that inflationary pressures from Trump’s tariff policies might limit the Federal Reserve to a single rate cut this year, potentially supporting the US Dollar. Meanwhile, the European Central Bank is expected to implement 25 basis point rate cuts over the next four meetings, with ECB President Christine Lagarde and other policymakers signalling support for further easing, which could add downward pressure on the Euro.
From a technical perspective, the broader bearish trend of EUR/USD remains intact as long as the pair trades below the 200-day SMA. Short-term momentum is mixed, with the RSI at 54 hinting at some recovery, while the ADX below 30 suggests weakening trend strength. EUR/USD pair finds initial support at …, the year-to-date low from January 13, with a critical psychological level at …. On the upside, resistance levels include the 2025 high of … (January 22), the interim 55-day SMA at …, and the December 2024 peak at … (December 6).
The Australian Dollar (AUD) remained steady against the US Dollar (USD) on Thursday, supported by easing market concerns after US President Donald Trump announced smaller-than-expected tariffs on Chinese imports, alleviating fears of a trade war's impact on China's economy and its close trade ties with Australia. While Chinese authorities introduced measures to stabilize stock markets, including expanded liquidity tools and pension fund investments in equities, Australia's S&P/ASX 200 Index fell due to weaker commodity prices, despite strong Wall Street gains. Meanwhile, the US Dollar Index (DXY) stayed firm above 108.00, buoyed by expectations of steady Federal Reserve rates and inflationary pressures linked to Trump’s policies. Traders are closely monitoring US economic data and Australia's quarterly inflation report, which may influence expectations of a Reserve Bank of Australia (RBA) rate cut, especially as Australia's core inflation approaches the RBA's 2%-3% target range.
From a technical perspective, the AUD/USD pair trades near … on Thursday, maintaining a bullish bias within an ascending channel pattern, as indicated by a 14-day Relative Strength Index (RSI) slightly above 50. The pair faces immediate resistance at the psychological level of …, with the next target near …, the channel's upper boundary. If it breaks the boundary, the price would be target to the … and …, supported by the 55-days Simple Moving Average line (EMA). On the downside, support levels include the nine-day EMA at …, the 14-day EMA at …, with stronger support at the key psychological level of … and the weekly-low point of ….
