Bearish Outlook
- Sell the EUR/USD pair with a take profit set at 1.1500.
- Place a stop loss at 1.1750.
- Timeframe: 1-2 days.
bullish outlook
- Buy the EUR/USD pair with a take profit at 1.1750.
- Establish a stop loss at 1.1750.
The EUR/USD exchange rate has declined for the second consecutive day, dropping to 1.1635 from a year-to-date peak of 1.1820. This fall follows the release of disappointing labor data from the US as traders await further inflation reports.
Inflation and Tariff Decisions
The decline in the EUR/USD pair came after the Bureau of Labor Statistics (BLS) published its December employment report. It indicated the economy added 55,000 jobs, falling short of the expected 70,000. This brings the total job gains for 2025 to 584,000, marking the worst performance since 2023.
The job market situation has been challenging as companies have tightened their budgets, a reaction to President Trump’s tariffs. Key manufacturing sectors, which the president aimed to protect, continued to see job losses throughout the year. It was further exacerbated by recent announcements of significant layoffs within government departments.
The next significant news for the EUR/USD will come from the US, with Rafael Bostic and Tom Birkin set to discuss the labor market and provide insights on future interest rates.
The primary catalyst for movement in the pair will be the US inflation report expected on Tuesday. Economists surveyed by Reuters anticipate a 2.7% increase in both the headline and core consumer price index (CPI) for December.
Interestingly, declining gas prices might lead to lower-than-expected inflation. Current average gasoline prices are recorded at $2.8 per gallon, which hasn’t been seen in years.
The EUR/USD pair is also likely to respond to an upcoming Supreme Court ruling regarding President Trump’s tariffs. Overturning these taxes could significantly challenge the president, especially since the US trade deficit is already on a downward trend. However, he still has various strategies to achieve his tariff objectives.
Technical Analysis of EUR/USD
Looking at the daily chart, the EUR/USD has seen a decline over recent days. This downturn started after reaching a critical resistance point at 1.1805, recorded on July 3rd.
The pair has turned its 50-day moving average into a resistance level and is forming a head-and-shoulders pattern, a typical sign of a bearish reversal. Additionally, indicators like the Relative Strength Index (RSI) and MACD are trending downwards.
Consequently, the prevailing expectation seems bearish, with the next major target set at 1.1500. However, if there’s a rebound above the right shoulder at 1.1805, it would invalidate this bearish perspective.
Chrispus Nyaga is a seasoned financial analyst, coach, and trader, boasting over eight years of industry experience. He has been associated with prominent firms such as ATFX, easyMarkets, and OctaFx. Furthermore, he has contributed extensively to platforms like SeekingAlpha, Investing Cube, Capital.com, and Invezz. In his leisure time, he enjoys watching golf and spending quality moments with his wife and children.
