EUR/USD price hits six-week high after bullish ECB and Trump comments
Euro gains as ECB hints at rate cuts
The EUR/USD pair has experienced a notable surge this week, marking its second consecutive week of gains after a series of bearish weeks. The currency pair has climbed 1.8% to a six-week high above the pivotal resistance level of 1.0460.
This upward momentum was particularly evident during the European trading session on Friday, January 24, when the pair broke above 1.0460, though it was subsequently capped by the Fibonacci golden ratio and the 50-day Exponential Moving Average (EMA).
Driving this rally were comments from U.S. President Donald Trump at the World Economic Forum in Davos. Trump's advocacy for immediate interest rate reductions both in the US and globally has put downward pressure on the U.S. Dollar (USD) against a basket of major currencies. His remarks emphasized, "It seems like the markets are more concerned about rate cuts and any kind of greater indicator that there'll be more rate cuts," which has evidently influenced market sentiment and currency valuation.
EUR/USD price dynamics (October 2024-January 2025). Source: TradingView.
On the European side, the European Central Bank (ECB) has also contributed to the bullish outlook on EUR/USD. ECB policymakers have signaled a high likelihood of a rate cut, with President Christine Lagarde stating the bank is "not overly concerned" about inflation risks from abroad, and will continue to reduce rates gradually. Markets have priced in a 96% probability of a rate cut at the ECB's upcoming meeting, adding further support to the Euro (EUR).
EUR/USD price forecast to be influenced by U.S. and Eurozone PMI
Technical analysis further supports this bullish trend. After making a bullish market structure break above 1.0436 early this week on the daily chart, both the daily and 4-hour Relative Strength Index (RSI) readings are in bullish territory, suggesting more potential for upward price movements.
Looking forward, key economic indicators scheduled for release on Friday could influence the EUR/USD trajectory. The preliminary readings of the HCOB Purchasing Managers Index (PMI) for January from both the Eurozone and Germany, alongside the US S&P PMI, will be critical in shaping market expectations. These data points will provide insights into the health of manufacturing and services sectors, potentially impacting central bank policies and, consequently, the EUR/USD price trajectory.
The U.S. job report increased demand for the Dollar, causing EUR/USD to retreat from its peak. The EUR/USD rally past 1.0436 was halted as the 1.0458 resistance level held firm.
