EUR/USD: Bulls stop advancing – OCBC
28.01.2025, 08:49

EUR/USD: Bulls stop advancing – OCBC

Euro (EUR) fell on headlines regarding universal tariffs. FT reported that Treasury secretary Scott Bessent favours universal tariffs on US imports, starting at 2.5% while Trump said he wants tariffs ‘much bigger’ than 2.5%. This puts tariff agenda back on the table and should restraint EUR bulls for now. Pair was last at 1.0428 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Some pullback is not ruled out this week

"Bullish momentum on daily chart intact but shows signs of fading while RSI shows tentative signs of falling from near overbought conditions. Some pullback is not ruled out this week. Support at 1.0420/30 levels (23.6% fibo, 50 DMA), 1.0350 (21 DMA) and 1.03 levels. Resistance at 1.0520, 1.0570 levels (38.2% fibo retracement of Sep high to Jan low)."

"On ECB meeting (Thursday), our house view looks for a cut, consistent with market expectation for a 25bp cut. Recent ECB-speaks remain dovish and continued to point to a measured pace of rate cut with no hint of larger magnitude of rate cut. Stournaras said the cuts should be in the order of 25bp each time so that by end-2025, rates is close to 2%, from the 3% that we are today."

"Klass said that he is comfortable with market bets for rate cuts at the next 2 meetings but not convinced yet that ECB needs to go into stimulative mode. Villeroy said it is plausible for rates to be around 2% in summer. Lagarde said that disinflation process continues, and policymakers do not see themselves as behind the curve. ECB will maintain its measured approach to ease monetary policy."

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