EURUSD Recovery Continues
EURUSD is rallying today despite a slew of dovish comments yesterday, strengthening expectations of a fresh ECB rate cut next week. Indeed, the rally looks more a function of current USD weakness than EUR strength. USD has weakened in the immediate aftermath of Trump taking office with the trade tariffs he promised for day one, yet to be actioned. Traders had been expecting a firm USD rally in response to such a move but USD remains weak for now in the absence of any levies being applied. Trump has promised to tariff Canadian and Mexican goods at 25% on Feb 1st though, for now, this is doing little to boost the Dollar and USD looks unlikely to rally near-term until traders see any tariffs applied.
ECB On Watch
Looking ahead, EUR will be in the spotlight next week with the ECB meeting due. Traders are widely expecting the bank to cut rates by a further .25%. These expectations were cemented yesterday with ECB’s Nagel voicing support for a cut, despite being generally considered among the most hawkish in the ECB camp. Given these entrenched expectations, focus will shift to ECB guidance where bears will be looking for the bank to keep the door open to further easing in order to drive EUR lower. If the bank fails from giving a fresh dovish signal, we could see EURUSD continue higher near-term, particularly if USD weakens further over the coming week.
Technical Views
EURUSD
The rally in EURUSD has seen the market breaking back above the bear channel from 2024 highs and back above 1.0365. 1.0515 is now the next test for bulls with a break higher there seen opening the way for a recovery towards 1.0724 next. Interestingly, we have a sell limit in the Signal Centre today at 1.0505 suggesting a preference to fade the current recovery into the next resistance level.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.