EUR/USD forecast takes a boost on Trump’s softer tariffs tone

All eyes and ears were on Donald Trump’s speech today as he addressed the World Economic Forum in Davos. Traders and investors were eagerly anticipating any fresh insights into his trade policies, potential tariffs, and international tax plans. The key takeaway point was that he used a much softer tone regarding tariffs, while wanting to bring down interest rates and crude oil prices. His words helped to soothe investor nerves further, allowing the likes of the euro, yuan and Canadian dollar to rise against the US dollar, with the latter also weighed down by a bigger-than-expected rise in jobless claims data. The EUR/USD forecast has therefore taken a boost.

Jobless claims point to softening labour market

On the economic front, jobless claims have climbed for the second consecutive week, coming in at 223,000 compared to last week’s 217,000. This exceeded expectations of 220,000 and signals some short-term softening in the labour market. While the numbers aren’t alarming, they suggest a potential cooling in what has been a strong area of the economy. 

Technical EUR/USD forecast improves further

Trump’s softer tone on the EU helped the euro to turn positive on the session, after being in the red earlier. The resulting price action on the EUR/USD was the formation of a small hammer candle on the daily time frame. This apparent bullish signal is consistent with price action since rates created what looks like a potential bottom around the 1.0200 handle last week. Since that low was formed, the EUR/USD has broken a bearish trend line, moved above the 21-day exponential average and a pivotal zone between 1.0300 to 1.0340.

Source: TradingView.com

From here, it looks like the EUR/USD chart is heading towards the 1.05 handle, with the area starting around 1.0445 to 1.0500 marking the next pivotal zone. Should the EUR/USD go on to clear this hurdle as well, then we could see further technical buying in the days ahead.  So, the technical EUR/USD forecast is starting to look a lot more promising for the bulls.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

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