EURUSD Technical Analysis: The focus turns to the latest Trump's escalation over Greenland

FUNDAMENTAL
OVERVIEWUSD:The US Dollar weakened
across the board to start the week following Trump’s
escalation over
Greenland. In fact, the US President threatened to impose 10% tariffs starting
on February 1 on the UK, France, Germany and a few other European countries
unless the U.S. is permitted to buy Greenland. The tariffs will rise to 25%
from June 1 in case of no deal.As seen last year, risk-off
moves caused by Trump’s tariffs stemmed from growth worries. Growth worries
trigger a selloff in the stock market and in turn a fall in Treasury yields on
expected future weakness in the economy. This in turn weighs on the greenback
on expected earlier or larger rate cuts down the road. This is always taken in
relation to the expectations. Given the recent rally in the USD on some
slightly hawkish repricing, this latest escalation kind of unwinds those bets.
If we were to get a de-escalation now, the US Dollar would probably rally
again, and more so if the economic data in the next weeks and months strengthens.
EUR:On the EUR side, the threat
of tariffs on the largest European economies isn’t good news of course, but given
the recent positioning, it weighed more on the greenback. The Fed has also much
more room to cut rates compared to the ECB, which has already reached the
neutral level and has inflation at target. In terms of monetary
policy, the ECB remains in a neutral stance reaffirming its data-dependent and
meeting-by-meeting approach to policy decisions. ECB members continue to repeat
that the current policy is appropriate, and they won’t respond to small or
short-term deviations from their 2% target. The data has been supporting the
central bank’s neutral stance, with inflation data recently surprising to the
downside.EURUSD TECHNICAL
ANALYSIS – DAILY TIMEFRAMEOn the daily chart, we can
see that EURUSD opened
lower today but eventually closed the gap and extended the gains into the downward
trendline. We can expect the sellers to step in around these levels with a defined
risk above the trendline to position for a drop into the 1.15 handle. The
buyers, on the other hand, will want to see the price breaking higher to pile
in for a rally into the 1.18 level next.EURUSD TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAMEOn the 4 hour chart, we can
see more clearly today’s price action with the pair struggling to extend the
gains near the trendline. There’s not much we can add here as the sellers will
look for short opportunities around these levels with a defined risk above the
trendline, while the buyers will wait for a break above the trendline to start
targeting new highs.EURUSD TECHNICAL ANALYSIS –
1 HOUR TIMEFRAMEOn the 1 hour chart, we can see that the price is trading at the upper
bound of the average daily range for today. This suggests that we might not see
much more upside today and the price could either consolidate here or pull
back. There’s a minor support zone around the 1.16 handle. If the price gets
there, we can expect the buyers to step in with a defined risk below the
support to position for a break above the trendline. The sellers, on the other
hand, will look for a break lower to increase the bearish bets into new lows.UPCOMING CATALYSTSTomorrow we have the weekly US ADP jobs data. On Thursday, we get the latest US
Jobless Claims figures. On Friday, we have the Eurozone and US Flash PMIs. Watch
out also for headlines and Trump’s posts on Truth Social regarding Greenland as
the market’s focus remains on this latest trade war.
This article was written by Giuseppe Dellamotta at investinglive.com.

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