Article by: ETO Markets
In Eurpoe market, rising tariff tensions and central bank policies are shaping market sentiment, with US President Trump confirming 25% tariffs on Canadian and Mexican imports starting March 4, along with a 10% duty on Chinese goods and potential levies on EU imports. These trade barriers could lift inflation, prompting the Federal Reserve to maintain its current policy stance. Fed officials, including Chair Jerome Powell, stress the need for sustained restrictive rates amid persistent inflation, reinforcing USD strength. Meanwhile, the European Central Bank cut rates by 25 basis points to support weak eurozone growth, with President Christine Lagarde advocating a cautious, data-dependent approach. Diverging Fed-ECB policies, coupled with uncertainty around tariffs and sluggish eurozone growth, leave EUR/USD trading in a range until clearer signals emerge.
The Australian Dollar (AUD) extended its decline for the fifth consecutive day, breaking below 0.6300 amid escalating US trade tensions and weaker commodity prices. The US confirmed a 25% tariff on Canadian and Mexican goods from March 4, maintained a 10% duty on Chinese imports, and threatened a 25% tariff on EU goods, raising concerns over global trade. Given Australia’s reliance on Chinese demand, any slowdown could further pressure the AUD. Meanwhile, the Reserve Bank of Australia (RBA) cut rates to 4.10% in February but signaled no immediate easing cycle, with future cuts depending on inflation and employment data. Falling copper and iron ore prices added to the AUD’s weakness, while traders await Housing Credit and Private Sector Credit data for further direction.
EUR/USD continues its three-day decline, trading near 1.0390 on Friday, as renewed US-EU trade tensions weigh on the Euro. President Trump’s threat of a 25% tariff on Eurozone cars and other goods has heightened risk aversion, prompting a firm response from the European Commission. The potential tariff war adds pressure to the already struggling Eurozone economy. Meanwhile, the US Dollar strengthens, with the DXY hovering around 107.50 after US GDP growth met expectations at 2.3% in Q4 2024 and durable goods orders rebounded sharply by 3.1% in January. These factors continue to drive EUR/USD lower.
From a technical perspective, EUR/USD faces key resistance at 1.0528 (Feb 26 peak) and 1.0532 (YTD high), reinforced by the 100-day SMA. Further hurdles lie at 1.0572 (Fibonacci retracement) and 1.0629 (Dec 2024 high). On the downside, support levels include 1.0399 (Feb 27 low), 1.0282 (Feb 10 low), and 1.0209 (Feb 3 low), with the 2025 bottom at 1.0176 (Jan 13). Technical indicators are mixed, with RSI near 48 signalling waning bullish momentum, while ADX at 13 suggests a weak overall trend.
On thursday, the Australian Dollar (AUD) remains under pressure for the sixth consecutive day, extending its losing streak due to ongoing US trade tensions and economic data. US President Trump confirmed a 25% tariff on Mexican and Canadian goods, along with a 10% additional duty on Chinese imports, which heightened concerns for Australia’s economy, given its reliance on trade with China. The AUD also faced headwinds from disappointing Australian Private Capital Expenditure data, which contracted by 0.2% in Q4 2024. Additionally, the US Dollar Index (DXY) strengthened following the release of US GDP data, and trade uncertainties continue to weigh on the AUD. The Reserve Bank of Australia (RBA) recently cut its interest rate to 4.10%, signaling that while inflation remains a challenge, future rate cuts are not guaranteed. Investors remain cautious ahead of key economic data, including the Personal Consumption Expenditures (PCE) index and developments in US-China trade relations.
From a technical perspective, AUD/USD is trading around 0.6220 on Friday, with the pair remaining below the nine- and 14-day Exponential Moving Averages (EMAs), signaling weakening short-term momentum. The 14-day Relative Strength Index (RSI) is also below 50, supporting the bearish outlook. Immediate support is at the psychological level of 0.6200, with a break below this level potentially pushing the pair towards 0.6087, the lowest level since April 2020. On the upside, resistance lies at the nine-day EMA (0.6297) and the 14-day EMA (0.6302), with a decisive break above these levels opening the path to a two-month high of 0.6408, reached on February 21.
