EUR/USD: Consolidation is likely in near term – OCBC

Euro (EUR) traded under pressure amid broad US Dollar (USD) strength on tariff threats. Yesterday at the last GC meeting, ECB lowered policy rates for the 5 the consecutive meeting by 25bp. Pair was last at 1.0370 levels, OCBC's FX Frances Cheung and Christopher Wong analysts note.

Near term risks for EUR skewed to the downside

"Deposit rate now stands at 2.75%. Decision was unanimous and the Council did not discuss the possibility of a larger cut. Lagarde said that rates remain in restrictive territory, and it is premature to discuss when ECB should stop cutting rates. According to a Reuters report, 3 ECB policymakers commented that they thought a further rate cut was likely to go through in March meeting without much resistance before debate within the Governing Council on further easing becomes more heated."

"On tariff implications, Lagarde said that tariffs would have a 'global negative impact' on growth but their potential effect on inflation was 'far more complicated' due to possible retaliation and market adjustment. Recall earlier this week, FT reported that US Treasury secretary Scott Bessent favors universal tariffs on US imports, starting at 2.5% while Trump said he wants tariffs ‘much bigger’ than 2.5%."

"Near term risks for EUR skewed to the downside on tariff threats and EU growth concerns (a risk that ECB may need to cut deeper). Bullish momentum on daily chart shows signs of fading but decline in RSI moderates. Consolidation likely. Support at 1.0360 (21 DMA) and 1.0240 levels. Resistance at 1.0420/30 levels (23.6% fibo retracement of Sep high to Jan low, 50 DMA), 1.0520 levels."