Technical Analysis

EUR/USD Price Analysis – Jan 31, 2025

By LHFX Technical Analysis
Jan 31, 20255 min
Eurusd

Daily Price Outlook

During the European trading session, the EUR/USD currency pair struggled to stop its downward trend, staying under pressure around the 1.0377 level and even hitting an intraday low of 1.0366.

However, the main reason behind this decline is the weakening of the Euro. A slowdown in inflationary pressures across six German states contributed to the fall. This has led to expectations that the ECB might ease its monetary policy in the near future.

At the same time, the US Dollar (USD) is maintaining a strong position. The US Dollar Index (DXY) remains firm, hovering around 108.20, as the greenback benefits from its safe-haven status.

The ongoing uncertainty in global markets has strengthened demand for the US Dollar. Moreover, President Donald Trump's recent comments about imposing heavy tariffs on North America and BRICS countries have added further pressure on the Euro.

This combination of factors has kept EUR/USD under pressure, as investors focus on the broader strength of the US Dollar.

US Dollar Strengthens Amid Tariff Threats and Fed's Cautious Stance

On the US front, the US Dollar (USD) continues to maintain strength, with the US Dollar Index (DXY) trading around 108.20. The greenback's appeal as a safe-haven currency is bolstered by recent comments from former President Donald Trump.

He reiterated his plans to impose hefty tariffs on countries in North America and the BRICS nations, creating further uncertainty in global markets.

Trump took to his social media platform, TruthSocial, warning that any country attempting to create or back a new currency to replace the US Dollar would face a 100% tariff and be shut out of the US market.

Market experts believe that Trump's use of tariffs is part of his broader economic strategy, which could potentially lead to inflationary pressures in the US economy. This could support the Federal Reserve (Fed) in maintaining its current interest rate stance.

The Fed recently decided to keep interest rates unchanged in the range of 4.25%-4.50% and indicated that it will remain cautious until there is clear progress in reducing inflation or signs of weakness in the labor market.

Looking ahead, the next key data point for the US Dollar will be the Personal Consumption Expenditure (PCE) Price Index for December, set to be released at 13:30 GMT. Economists expect a slight rise in core PCE inflation to 0.2% on a monthly basis, compared to 0.1% in November. Year-on-year, core PCE inflation is expected to stay steady at 2.8%.

EUR Faces Pressure Amid Slowing Inflation and ECB's Cautious Outlook

On the EUR front, the Euro (EUR) is facing pressure as it weakens against other currencies. This decline comes amid a slowdown in inflation in six German states, with softer-than-expected Consumer Price Index (CPI) data for January.

The lower inflation figures have raised confidence that the Eurozone is on track to return to the European Central Bank’s (ECB) target inflation rate of 2%. This could potentially lead to the ECB easing its monetary policy in the future.

ECB President Christine Lagarde expressed optimism in her recent statement, declaring a victory over inflation for this year. The ECB reduced its Deposit Facility Rate by 25 basis points (bps) to 2.75%, signaling confidence in its fight against rising prices.

Meanwhile, Estonian Central Bank chief Madis Muller mentioned that it is realistic to expect inflation to be near 2% by mid-year. However, Lagarde cautioned that the ECB is still in “restrictive territory” and that future decisions will be made on a meeting-by-meeting basis, depending on the incoming data.

Looking ahead, investors are keenly awaiting the Eurozone’s Harmonized Index of Consumer Prices (HICP) data for January, which is set to be released on Monday. Before that, the preliminary German HICP data will be published at 13:00 GMT.

However, the impact of the German data is expected to be limited, as inflation in six states has already provided a clear picture of current price trends.

EUR/USD Price Chart - Source: Tradingview
EUR/USD Price Chart - Source: Tradingview

EUR/USD – Technical Analysis

EUR/USD is consolidating near $1.03889, struggling to gain traction after recent downside pressure. The pair is hovering around the pivot point at $1.03887, acting as a key battleground for bulls and bears.

Immediate resistance is at $1.04291, with further hurdles at $1.04667 and $1.05118. A break above these levels could strengthen bullish sentiment and push EUR/USD toward fresh highs.

On the downside, immediate support is at $1.03413, with stronger levels at $1.03069 and $1.02665. A break below $1.03413 could accelerate selling pressure, reinforcing the bearish outlook. The 50-day EMA at $1.04290 is acting as a dynamic resistance level, limiting upside potential.

Technically, the pair remains in a cautious stance, with buyers attempting to hold ground above $1.03819. A move above this level could trigger a retest of $1.04291, aligning with the 50-day EMA. However, failure to sustain above the pivot point may push the pair lower, bringing critical support levels into focus.

The outlook remains neutral-to-bullish as long as EUR/USD holds above $1.03819. A decisive break above $1.04291 could shift momentum in favor of the bulls, while a dip below $1.03413 would reinforce a bearish bias, signaling further declines.

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EUR/USD

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