The euro edged higher against the dollar on Friday, reaching 1.1657. This uptick was fueled by expectations of a more dovish stance from the Federal Reserve and growing concerns over the economic impact of new U.S. tariffs.
Markets Watch Fed Signals Amid Tariff Tensions
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Traders are keenly observing Federal Reserve policy shifts and the ripple effects of new U.S. tariffs, which are creating economic uncertainty.
Recent economic data released this week surpassed forecasts, further suggesting a softening labor market. This comes on the heels of a lackluster employment report from the previous week.
Politically, the market’s attention remains fixed on potential shifts within the Federal Reserve. President Donald Trump has nominated Stephen Miran, head of the Council of Economic Advisers, to join the Fed’s Board of Governors. Additionally, Christopher Waller is reportedly emerging as a leading candidate for Fed Chair. These developments have bolstered market expectations for an imminent rate cut, possibly as early as September.
Adding to economic pressures, new U.S. retaliatory tariffs, with rates varying from 10% to 41%, became effective at midnight on Thursday. This has heightened fears of economic headwinds, further dampening sentiment toward the U.S. dollar.
Technical Analysis: EUR/USD
H4 Chart Analysis
The EUR/USD pair experienced a corrective move to 1.1698, followed by consolidation near the peak of this correction. A break below the 1.1611 level could initiate a downward wave, targeting 1.1520, with potential for further declines to 1.1343. The MACD indicator supports this bearish outlook, showing its signal line above zero but exiting the histogram zone, suggesting a pullback to lower levels.
H1 Chart Analysis
The pair formed a downward impulse to 1.1611, followed by a rebound to 1.1679. The current consolidation phase appears poised for a downward breakout, potentially starting a fifth wave of decline toward 1.1520. A brief retest of 1.1611 from below might occur before another drop to 1.1444, with an eventual target of 1.1343. The Stochastic oscillator corroborates this view, with its signal line below 50 and trending sharply downward toward 20.
Technical indicators suggest a near-term bearish correction is likely for the EUR/USD pair, despite underlying upward pressure.
The EUR/USD remains under upward pressure due to speculation surrounding the Federal Reserve and concerns over tariffs. However, technical indicators point to a likely near-term bearish correction.
