EUR/USD Price Forecast: Outlook remains bearish

In a negative start to the week, EUR/USD came under further selling pressure, dipping back below 1.0300 to print multi-day lows as the US Dollar (USD) managed to extend its recovery from last week.

The US Dollar Index (DXY), in the meantime, climbed above the 108.00 level, hitting at the same time new four-day peaks amid the lacklustre performance of US yields and backed by extra tariff narrative.

Tariff twists and Dollar dynamics

The ongoing recovery in the greenback happened alongside new twists in President Trump’s tariff saga. While the much-discussed 25% tariff on Canadian and Mexican imports has been delayed, the 10% duty on Chinese goods remains in place. This mix of uncertainty and a lack of clear guidance from the White House has led investors to offload long US Dollar positions early in the last week.

However, the Greenback met extra upside impulse after President Trump argued over the weekend that he would introduce new 25% tariffs on all steel and aluminium imports into the US, in addition to the existing metals duties. He added that this measure followed his Friday remark that he planned to announce reciprocal tariffs on several countries early this week.

Central banks under the spotlight

Market watchers are now focusing on central banks. Last week, at its January 28-29 gathering, the Federal Reserve (Fed) chose to keep interest rates steady, leaving traders guessing about the timing of the next rate cut. Despite robust US economic growth, persistent inflation, and low unemployment, the Fed is playing it safe by describing price pressures as “elevated” and maintaining rates at 4.25%-4.50%. This cautious stance comes amid uncertainties stirred up by Trump’s trade and fiscal policies.

Across the Atlantic, the European Central Bank (ECB) cut rates by 25 basis points last week, exactly as expected. With the eurozone struggling with slow growth and inflation still above the ECB’s 2% target, this measured easing was seen as necessary. ECB President Christine Lagarde stressed that future moves would be data-driven—ruling out more drastic cuts like 50 basis points—and expressed confidence that inflation could be reined in by 2025, even as global trade tensions remain high.

Winners and losers in a trade war

The shifting tariff landscape is a double-edged sword. Prolonged tariffs might drive up US inflation, potentially forcing the Fed to adopt a more hawkish stance that could strengthen the greenback. Conversely, if tariffs extend to the European Union (EU), the Euro (EUR) could face additional headwinds, possibly nudging EUR/USD closer to parity sooner than expected.

A technical snapshot

On the charts, EUR/USD appears to have deflated from its recent peaks near 1.0450. The pair should find some decent support at the weekly low of 1.0209, recorded on February 3. A break below this level could lead to a slide toward 1.0176—the lowest point seen in 2025 so far.

On the upside, resistance is seen at around 1.0532—the yearly high from January 27—with further hurdles at 1.0629 (the December peak) and the 200-day Simple Moving Average at 1.0754.

The Relative Strength Index (RSI) has slipped back to around 42, suggesting some loss of momentum, while the Average Directional Index (ADX) lingers near 18, indicating that the current trend might be waning.

EUR/USD daily chart

The Road Ahead for the Euro

Looking forward, the euro faces a challenging journey. A strong US Dollar, divergent monetary policies between the ECB and the Fed, and internal eurozone issues—like Germany’s slowing economy—could all weigh on the single currency. While short-term rallies may occur, the overall outlook for the euro remains uncertain as global market forces continue to evolve.