Market Action Is Heating Up: Tariffs Details and NFP Ahead
EUR/USD at Support. Fundamentals to Decide Next Move.
U.S. inflation heated up in February, as shown by Friday’s Core PCE Price Index which increased by 0.4% in February, more than the expected 0.3%. This stifled the dollar’s recovery and erased all gains made earlier in the week.
The market is still waiting for clarity regarding the trade tariffs, which will likely come this week as the levies will come into effect on April 2. On Wednesday last week, President Trump announced 25% tariffs on imported cars and small trucks, starting April 3.
Investors are cautious and they are far from a risk-on mindset, with the next move depending on the exact implementation of the trade tariffs. If the levies will be imposed on specific items and not across the board (on all imports), this will be viewed as positive or at least not as destructive.
Economic Calendar Highlights
The week opens with German inflation data in the form of the German Preliminary CPI that will be released Monday at 12:00 pm GMT. Tuesday at 2:00 pm GMT we take a look at the U.S. Manufacturing PMI and Wednesday at 12:15 pm GMT we will get the first glimpse at U.S. employment data with the release of the ADP Non-Farm Employment Change report.
The U.S. Services PMI will be released Thursday at 2:00 pm GMT and the main event of the week is scheduled for Friday at 12:30 pm GMT: the U.S. Non-Farm Payrolls report. It is widely considered the most important indicator of the health of the labor market and it usually creates strong movement on US Dollar pairs. Depending on the details of the trade tariffs and how they are interpreted by the market, the NFP may trigger a higher volatility than usual.
Technical Outlook – EUR/USD
The pair bounced at 1.0775 support but this does not necessarily mean that the level will hold. It is relatively normal for the price to make several attempts to move past a level before actually breaking it.
The bulls already failed to create a significantly higher high (the pair moved twice above 1.0900 and then fell) and the RSI is coming down from overbought. This shows that the technical side favors the bears, making a break of 1.0775 likely.
This week will be heavily influenced by the fundamental side, with the trade tariffs and the NFP in focus. Depending on the outcome of these events, the technical side may take a step back as price action will be driven by the fundamentals.
