The Euro/US Dollar (EUR/USD) pair is trading cautiously near 1.0420, awaiting the Federal Reserve's (Fed) monetary policy announcement and potential implications of U.S. President Donald Trump's tariff plans. Investors are closely watching the Fed's decision and Chair Jerome Powell's press conference for clues about future interest rate movements, while also assessing the impact of Trump's proposed tariffs on global growth and inflation.
The EUR/USD pair traded cautiously near 1.0420 on Wednesday, awaiting the Federal Reserve (Fed) monetary policy announcement scheduled for 19:00 GMT. While a steady interest rate is widely anticipated, investors are keenly focused on Fed Chair Jerome Powell's press conference for insights into the Fed's future policy direction. A key factor influencing market sentiment is the expectation of U.S.
President Donald Trump's imposition of hefty tariffs on trading partners, which could escalate global growth concerns and fuel inflation. Trump has proposed tariffs on pharmaceuticals, steel, and sophisticated chips to bolster domestic production. Furthermore, 25% tariffs on Canada and Mexico, along with 10% on China, are on the cards. These tariff threats are perceived as a significant risk factor for the global economy, particularly for the Eurozone. The European Central Bank (ECB) is also scheduled to meet on Thursday, with traders expecting a 25 basis points interest rate cut. This dovish stance by the ECB, driven by fears over Trump's tariffs potentially weakening the Eurozone economy, adds to the cautious outlook for the EUR/USD pair. Germany, the Eurozone's economic powerhouse, is forecast to contract this year, according to the Federal of German Industries (BDI). The agency attributes this contraction to the government's inability to address structural weaknesses in the national economy. Investors will closely watch ECB President Christine Lagarde's press conference for insights on how the Eurozone plans to navigate the potential impact of Trump's tariffs. From a technical perspective, EUR/USD is struggling around the 50-day Exponential Moving Average (EMA) near 1.0455, having corrected to 1.0410 after failing to break above the key resistance of 1.0530. The pair remains supported by the 20-day EMA around 1.0395. The 14-day Relative Strength Index (RSI) has failed to breach the 60.00 level, suggesting a sideways trend. Downside support is seen at the downward-sloping trendline from the September 30, 2024, high, followed by the January 20 low. Conversely, the December 6 high of 1.0630 acts as a key barrier for the Euro bulls
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