EUR/USD price retraces as ECB cuts and Trump tariffs dim bullish outlook
EUR/USD Tests 1.0460 Support as EU Faces NATO and Tariff Challenges.
The EUR/USD price has entered a phase of retracement after a strong uptrend last week, where the pair rallied from 1.0290 to a high of 1.0515.
However, since the start of this week, the currency pair has been gradually declining, down again by 0.3% today. Despite this, EUR/USD has found support at the key level of 1.0460, which aligns with the bullish trendline from last week’s rally. But the pair slightly recovered in the European session, edging back to 1.0465.
While these technical levels play a significant role in short-term price action, the broader outlook for the euro faces headwinds. The ongoing discussions among EU leaders about a joint defense fund, triggered by U.S. President Donald Trump’s threat to scale back NATO support, are unlikely to provide much support for the euro. Additionally, any hopes of similar EU coordination on fiscal spending to counter U.S. protectionism appear far-fetched.
EUR/USD price dynamics (Jan 2025 - Feb 2025). Source: TradingView
The market is pricing in -75bps for the European Central Bank (ECB) by year-end, but further rate cuts seem likely. Analysts expect four more cuts this year, bringing the ECB rate down to 1.75%, reflecting the eurozone’s unpreparedness to handle the economic fallout from Trump’s tariffs.
EUR/USD recent retracement comes as the Relative Strength Index (RSI) on the 4-hour chart shows a decline, but it remains in bullish territory. Should EUR/USD price decline extend below the 1.0460 support level, the next key support lies at 1.0420, where the 50 EMA also provides backing. However, external factors, including political risks and ECB policy decisions, suggest that the euro could face further pressure in the near term.
EUR/USD price steadies after 5 day rally as policymakers remain divided on policy. The price rallied for five consecutive days last week, breaking through the key resistance at $1.0460.
