In the Euro market, EUR/USD maintained its recovery above 1.0400 on Wednesday, bolstered by a weaker US Dollar, rising US Treasury yields, and expectations of prolonged high interest rates by the Federal Reserve (Fed) due to persistent inflation. Despite higher-than-expected US CPI data, renewed trade tensions, and a cautious outlook from Fed Chair Jerome Powell, the euro held steady. Market sentiment is still influenced by President Trump’s tariff policies, including a 25% levy on steel and aluminum imports, which could strengthen the USD and pressure EUR/USD. With diverging central bank policies—Fed rates steady amid strong economic data, and the European Central Bank (ECB) recently cutting rates to combat sluggish growth—EUR/USD faces uncertainty from ongoing trade disputes, policy divergence, and eurozone economic challenges, making its near-term direction reliant on economic data and geopolitical factors.
In the Australian market, the US Dollar regained strength on Wednesday, reaching weekly highs around 108.50 following stronger-than-expected US inflation data, which pushed AUD/USD down to the 0.6235-0.6230 region. Trade tensions remain a concern, with President Trump maintaining tariffs on Chinese goods, heightening fears of retaliation that could affect Australian exports. While US inflation may keep the Fed in a hawkish stance, Australia’s inflation is cooling, with Q4 CPI at 2.5% and trimmed mean CPI hitting a three-year low of 3.2%, increasing speculation of a Reserve Bank of Australia (RBA) rate cut on February 18. Commodities like iron ore and copper remain resilient but could face pressure if Chinese demand weakens. Australia's economic data, including the Melbourne Institute’s Consumer Inflation Expectations on February 14, could influence market sentiment.
The EUR/USD pair continued its upward trend for the third consecutive session, trading around 1.0430 during Asian hours on Thursday, as investors await Germany's Final Harmonized Index of Consumer Prices (HICP) data, with inflation expected to remain steady at 2.8% year-over-year in January. However, concerns about a potential global trade war are weighing on the pair, as the White House indicated that President Trump might announce a reciprocal tariff plan before meeting with Indian Prime Minister Modi. Meanwhile, US inflation data for January surpassed expectations, with the Consumer Price Index (CPI) rising 3.0% year-over-year, and core CPI increasing to 3.3%. This stronger-than-expected inflation has reinforced expectations that the Federal Reserve will maintain interest rates at 4.25%-4.50% for a prolonged period, with the likelihood of a rate cut in June now dropping to nearly 30%. Fed Chair Jerome Powell noted that while inflation has moderated, the central bank still has work to do, citing robust labor market conditions and economic growth.
The Relative Strength Index (RSI) on the 4-hour chart for EUR/USD has risen above 70, indicating the possibility of a short-term correction before the uptrend resumes. Immediate resistance is seen at …, which coincides with the Fibonacci 61.8% retracement of the latest downtrend. A break above this level, followed by confirmation as support, could lead the pair to target …-… (round level, Fibonacci 78.6% retracement) and … (static level). On the downside, initial support is found at …, marked by the 100-period Simple Moving Average (SMA) and the Fibonacci 50% retracement, with further support around …-…(Fibonacci 38.2% retracement, 200-period SMA).
The Australian Dollar (AUD) rose after Australia’s Consumer Inflation Expectations climbed to 4.6%, but trade tensions and US tariffs keep it under pressure. President Trump’s 25% tariff hikes and Fed Chair Powell’s cautious stance on rate cuts add to headwinds. Market odds indicate a 95% chance of an RBA rate cut to 4.10% in February as inflation cools. Meanwhile, stronger US inflation has reduced expectations for a Fed rate cut in June to 30%, with Powell and other officials signaling a patient approach. With Trump expanding tariffs and further actions likely, market focus now shifts to upcoming US PPI data.
The AUD/USD pair is trading near …, maintaining its position above the nine-day (…) and 14-day (…) Exponential Moving Averages (EMAs), signaling strong short-term momentum. The 14-day Relative Strength Index (RSI) remains above 50, reinforcing a bullish outlook. If the pair sustains its upward movement, it may test the psychological resistance at …, with further upside potential toward the eight-week high of …, last reached on January 24. Conversely, a decisive break below the key support levels at the EMAs could weaken momentum, potentially pushing the pair toward the psychological support level of ….
