- The EUR/USD outlook shows a bearish shift in sentiment.
- The euro pulled back from a six-week high as focus shifted to the likely ECB rate cut.
- The US ISM manufacturing PMI revealed weaker-than-expected business activity.
The EUR/USD outlook shows a bearish shift in sentiment as traders focus on the upcoming European Central Bank meeting. However, dollar weakness continued as market participants worried about the state of the US economy after Trump’s tariffs.
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The euro pulled back from a six-week high hit in the previous session as focus shifted to the likely ECB rate cut. Market participants are almost fully pricing a rate cut on Thursday. Notably, inflation in the Eurozone has dropped significantly, nearing the central bank’s 2% target. At the same time, forecasts for global growth have dropped since Trump started his tariff campaign. This has put more pressure on major central banks to lower borrowing costs.
Furthermore, market participants will focus on the message during the meeting. If policymakers signal more cuts in the future, the euro might drop. However, if they remain ambiguous, the currency might resume its uptrend.
The euro has gained in recent days as the dollar eased on trade tensions. Trump is set to implement a 50% tariff on aluminum and steel on Wednesday, which will keep the risk of trade wars alive. As a result, demand for the dollar has dropped.
Meanwhile, the ISM manufacturing PMI revealed weaker-than-expected business activity in the US. The index fell to 48.5, well below forecasts of 49.3. It raised concerns about the state of the economy after Trump’s tariffs.
EUR/USD key events today
- BOJ Gov Ueda speaks
- US JOLTS job openings
EUR/USD technical outlook: Rally pauses to retest the 1.1401
On the technical side, the EUR/USD price is pulling back after making a new high in the uptrend. Bulls recently broke above the 1.1401 key resistance level, strengthening the bullish bias. After the break, the price is retreating to retest this level.
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Moreover, the price trades above the 30-SMA with the RSI in bullish territory above 50. Therefore, there is a high chance the uptrend will continue after the brief pause. If the 1.1401 level holds firm as support, the price will bounce higher. The next target is at the 1.1500 key psychological level.
However, the price might break below the level. Still, bears will face the 30-SMA support and the bullish trendline.
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Saqib Iqbal
