EURUSD, Dow Forecast: NFP, CPI, and Trump Policies

Article Outline:

• Dow records seven daily rebounds from 45,000 barrier
• EURUSD holds grounds above the 1.02 zone
• Inflation risks are under the spotlight between today’s NFP, Trump’s policies, and next week’s CPI

US Indices Hesitant at Record Highs

Following stronger-than-expected earnings from Amazon on Thursday, the Dow climbed back towards the 45,000 zone but failed to break through, marking the seventh consecutive rejection at this key resistance on the daily chart. Trump’s policies, combined with China’s AI rivalry, continue to weigh on the markets, keeping haven assets in demand and preventing US indices from reaching new highs.

Geopolitical tensions and trade war risks intensified this week as Trump stated his intent to take control of Gaza and cut negotiations with China to avoid a trade war. With markets already on edge, focus now shifts to key US data, including today's NFP results, next week’s CPI, and Fed Chair Powell’s testimony at the Semi-Annual Monetary Policy Report.

US Core CPI fell to a six-month low of 0.2% in December, yet the year-over-year CPI increased to a six-month high of 2.9%, while the month-over-month CPI climbed to a nine-month high. Meanwhile, NFP exceeded expectations by 92K, reaching 256K, keeping inflation fears alive alongside Trump's unpredictable market moves.

EURUSD Holds Ground Above Parity

While the US Dollar Index remains above 107, the euro awaits signs of US inflation cooling to support a bullish rebound or maintain stability above parity. Although tariff risks with the EU may shift toward negotiations, Trump’s proposal to acquire Greenland and the EU's strong opposition add uncertainty for the currency.

Technical Analysis: Quantifying Uncertainties

EURUSD Forecast: 3-Day Time Frame – Log Scale

Source: Tradingview

The EURUSD has extended notable wicks toward the 1.02 support, reflecting bullish price action as the pair struggles to sustain lows at that level. Despite geopolitical and tariff-related risks, the euro continues to hold near 1.04. A firm close above the 1.0520 resistance is needed to confirm the next rally towards 1.0620, 1.0720, and 1.0850.

On the downside, strong support exists between 1.02 and 1.1070 before a potential retreat to parity and 0.99.

Dow Forecast: 3-Day Time Frame – Log Scale

Source: Tradingview

The Dow remains constrained by strong resistance at the 45,000-mark, having rebounded from this level seven times on the daily chart between November 2024 and February 2025. This pattern increases the risk of a potential double top and a major reversal unless the Dow firmly breaches this zone.

Failure to break the 45,200-resistance may extend a double-top formation, leading to a decline toward the lower boundary of a respected parallel channel between May 2024 and February 2025 at 43,300. A break below this channel could accelerate losses toward the double-top neckline, targeting 41,700 (January 2025 low), 40,800, and 38,800 (July 2024 lows).

Conversely, a confirmed breakout above 45,200 could extend the bull run towards 46,200 and 47,200.

Written by Razan Hilal, CMT

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