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EUR/USD, Oil Forecast: Two trades to watch

Article By: ,  Senior Market Analyst
Today 12:22 PM

EUR/USD is steady ahead of Lagarde & as trade tariff worries linger

  • USD rises as more trade tariffs are announced
  • ECB Lagarde and EZ Sentix investor sentiment data is due
  • EUR/USD holds steady at key 1.0330 pivot point

EUR/USD is holding steady above 1.03 after recovering from early weakness. Still, the pair's upside appears limited, given the prospects of US tariffs and possibly elevated US inflation data this week.

The U.S. dollar is rising after Trump announced 25% tariffs on all steel and aluminum imports into the US, with potential further tariffs to be announced on Tuesday and Wednesday. Uncertainty about the nature,  timing and potentially further tariffs could keep the US dollar supported this week.

On the data front, attention will be on US inflation figures, which could remain elevated. I made ongoing US exceptionalism, and the labour market remains resilient.

Fed chair Powell will also testify before Congress this week and could provide further clues on the outlook for rate cuts after the central bank left rates unchanged and suggested there was no rush to cut rates further until the data showed it was necessary.

Given the ongoing trade tariff concerns, any gains in the euro will likely be limited. Trump has repeatedly warned that the European Union is next in line for trade tariffs, given its large trade surplus with the US. This comes as the eurozone economy is already stagnating and as the ECB is expected to continue cutting interest rates.

Today, attention will be on ECB president Christine Lagarde, who could provide further clarity over the outlook for rate cuts in the region. Send text investor sentiment will also be under the spotlight.

EUR/USD forecast – technical analysis

EUR/USD continues to trade below the 50 SMA after failing to rise meaningfully above the dynamic resistance last week. The pair is hovering around the 1.0330 level, recovering from an early fall to 1.0285. The RSI is below 50, favoring sellers.

Failure to retake 1.0330 could see the price come under pressure again to 1.0285 and on towards 1.0250. Below here, 1.02 comes into play.

Buyers need to rise above 1.0330 to extend gains towards the 50 SMA at 1.04. A rise above the 50 SMA and 1.0450 could help stage a recovery towards 1.05 resistance zone.

Oil shrugs off the latest trade escalation.

  • Dip buyers lift oil after 3-weeks of losses
  • Trade tariff announcements on US steel & aluminium imports
  • Oil rises from 70.50 low towards the 50 SMA

Oil prices are pushing higher after last week's losses, driven by concerns over a global trade war. Today, bargain hunters are out after three straight weeks of losses.

Investors are shrugging off Trump’s latest tariff announcements. Trump said 25% tariffs will be applied to all steel imports, which provides a catalyst for uncertainty. The concern is that trade tariffs will dampen global economic growth and energy demand.

However, after last week's tariffs on Canada and Mexico were rowed back, it remains unclear whether these latest tariffs are a tool for negotiating or something more permanent.

While the market remains cautious about any developments surrounding trade tariffs, the reaction is significantly calmer than that of last Monday.

Chinese retaliatory tariffs on US exports are also taking effect today, clouding the outlook for global trade. China has also applied tariffs on US crude and LNG imports..

Oil forecast – technical analysis

The recent selloff appears to have found support at 70.50. However, the road higher is long. The price has risen above the 100 SMA and is testing the 50 SMA at 72.10 withing the  71.50 – 72.50 resistance zone.

A rise above here exposes the 200 SMA at 74.40 ahead of 75.00.

Failure to retake the 50 SMA could see the price correct lower to 70.50. A break below here creates a lower low towards 70.00 and 67.50.

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