EUR/USD Price Forecast: Bulls look to seize control above 1.0275-1.0280 confluence ahead of US PPI

EUR/USD recovers further from over a two-year low amid a modest USD downtick.
Reports of gradual Trump tariffs drag the US bond yields lower and weigh on the buck.
The divergent Fed-ECB policy outlook caps gains for the pair ahead of the US PPI print.

Haresh Menghani FXStreet

The EUR/USD pair builds on the overnight bounce from the 1.0180-1.0175 region, or its lowest level since November 2022 and attracts some follow-through buying for the second straight day on Tuesday. The uptick is sponsored by a modest US Dollar (USD) downtick, though it lacks bullish conviction amid the divergent Federal Reserve (Fed) and European Central Bank (ECB) monetary policy outlook.

Bloomberg, citing people familiar with the matter, reported on Monday that President-elect Donald Trump's economic advisers are considering a program to gradually increase tariffs month by month. The approach, aimed at boosting negotiating leverage and avoiding a spike in inflation, triggers a modest pullback in the US Treasury bond yields and drags the USD away from over a two-year top touched on Monday.

Meanwhile, easing fears about disruptive trade tariffs under Trump 2.0 boosts investors' confidence, which is evident from a generally positive tone around the equity markets. This turns out to be another factor undermining the safe-haven Greenback and offering some support to the EUR/USD pair. That said, the Federal Reserve's (Fed) hawkish shift in December should act as a tailwind for the US bond yields and the USD.

Furthermore, the upbeat US Nonfarm Payrolls (NFP) report released on Friday reinforced market expectations that the Fed will pause its rate-cutting cycle later this year. In contrast, the ECB is set to continue reducing interest rates further concerns about the faltering Eurozone economy. This holds back traders from placing aggressive bullish bets around the shared currency and keeps the EUR/USD pair below the 1.0300 round figure.

Market participants now look forward to the release of the US Producer Price Index (PPI), which will drive the USD demand and provide some impetus to the currency pair later during the North American session. The focus will then shift to the latest US consumer inflation figures due on Wednesday. The crucial US Consumer Price Index (CPI) should influence the Fed's policy path and determine the near-term trajectory for the EUR/USD pair.

EUR/USD 1-hour chart

Technical Outlook

From a technical perspective, the intraday move-up stalls near the 38.2% Fibonacci retracement level of the latest leg down witnessed over the past week or so. The said barrier, around the 1.0275-1.0280 zone, now coincides with the 100-hour Simple Moving Average (SMA) and should act as a pivotal point for intraday traders. A sustained strength beyond should allow the EUR/USD pair to surpass the 1.0300 confluence – comprising the 200-hour SMA and the 50% Fibo. level – and climb further towards the 1.0340-1.0345 zone, or the 61.8% Fibo. level. The momentum could extend further towards reclaiming the 1.0400 round figure en route to the 1.0435 region, or the monthly peak touched last week.

On the flip side, weakness below the daily low, around the 1.0235 region, could drag the EUR/USD pair to the 1.0200 mark and expose over a two-year low, around the 1.0180-1.0175 area touched on Monday. Some follow-through selling below the latter will be seen as a fresh trigger for bearish traders and pave the way for an extension of a well-established downtrend witnessed over the past four months or so. Spot prices might then accelerate the downfall towards challenging the 1.0100 round figure.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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