EUR/USD Price Forecast: Next on the upside comes 1.0630

EUR/USD extended its sharp rebound on Tuesday, climbing to the 1.0560 zone to hit a new top for the year amid further weakening of the US Dollar (USD), which receded to levels last traded in early December below the 106.00 mark when measured by the US Dollar Index (DXY).

Tariffs, geopolitics, and market sentiment

And so, it begun. President Trump’s 25% tariffs on imports from Canada and Mexico kicked in on Tuesday along with 20% tariffs on Chinese goods. In response, Beijing imposed additional tariffs on US imports, while Canada followed suit by introducing 25% duties on American goods, effective immediately.

So far, these tariffs can affect currencies in several ways: 

- If they fuel inflation, the Federal Reserve (Fed) may lean toward tighter policy, which often boosts the USD. 

- If they slow economic growth, the Fed might adopt a more dovish stance, which tends to weigh on the USD.

From Europe’s perspective, any US move to impose tariffs on EU goods could hurt the Euro, potentially dragging EUR/USD lower.

Meanwhile, the geopolitical landscape offered a glimmer of optimism in past hours. Reports of a potential peace deal in the Russia-Ukraine war lifted market spirits and gave riskier assets a much-needed boost—welcome news after last week’s tense (and reportedly disastrous) meeting between President Trump and President Zelenskyy at the White House.

Central banks under the microscope

The Fed recently kept its policy rate at 4.25%–4.50%, highlighting solid US growth, steady inflation, and a strong labour market. In addition, Chair Jerome Powell has repeatedly said it’s too soon to consider rate cuts, citing persistent inflationary pressures and healthy employment figures. Furthermore, Fed officials are also mindful that trade disputes could drive up consumer prices, making inflation harder to manage.

Across the road, the European Central Bank (ECB) is widely expected to cut its main interest rate by 25 basis points on Thursday to help support sluggish eurozone growth. In her latest remarks, ECB President Christine Lagarde has resisted calls for a larger, 50-point cut, opting instead to remain data-dependent. Lagarde still believes inflation can reach the ECB’s target by 2025, suggesting any further easing will be gradual.

Key levels and indicators to watch

EUR/USD is comfortably trading beyond the 1.0500 mark, a tad lower than earlier yearly tops around 1.0560.

Immediate resistance stands at the 2025 top of 1.0559 (March 4 ). A successful break above this barrier could target 1.0572 (a key Fibonacci retracement), followed by 1.0629 (the December 2024 peak).

On the downside, initial support emerges at 1.0359 (February 28 low). Below that, watch 1.0282 (February 10 low) and 1.0209 (February 3 low). A more pronounced pullback might aim for 1.0176 (the 2025 bottom from January 13).

Momentum signals remain mixed. The RSI near 59 suggests a modest increase in bullish momentum, while the ADX around 13 points to a generally weak overall trend.

EUR/USD daily chart

Short-term outlook

EUR/USD remains at the mercy of shifting trade policies, diverging central bank strategies, lacklustre eurozone growth, and political developments in Germany. Until there’s more clarity on tariffs or a clearer direction from both the Fed and the ECB, the pair may continue to move in a relatively narrow range.