The EUR/USD currency pair has rebounded, reaching its highest level since early January, driven by a weakening US dollar. This surge follows Donald Trump’s inauguration as US President, where his less confrontational tone regarding trade policy spurred a “risk-on” sentiment in financial markets.
Market Response to Trump’s Inauguration
The US dollar index dropped significantly after Trump’s inauguration speech, which differed from his previous rhetoric. His indications of delaying tariffs against major trading partners like China, Mexico, and the EU encouraged investors to move towards riskier assets, leading to gains in US equity markets, such as the Dow Jones and Nasdaq.
Divergent Monetary Policy Expectations
Prior to the recent rebound, the EUR/USD pair had been under pressure due to anticipated differences between the Federal Reserve (Fed) and the European Central Bank (ECB). The market expects the ECB to continue with rate cuts, while the Fed is seen as more cautious. Recent higher-than-expected US inflation figures further reinforce this divergence in monetary policy outlook.
Technical Overview
Technically, the EUR/USD pair has moved above a previously established downtrend. The appearance of a doji candlestick pattern earlier this month suggested a potential change in market direction. Additionally, positive divergence on the MACD and RSI indicators signals that the current upward momentum may continue. The pair is currently testing a key resistance level around 1.0376, with the next potential upside target at 1.0500. A break below 1.0253 could invalidate this bullish short-term view.
In Summary
- The EUR/USD pair has risen due to a weaker dollar following President Trump’s inauguration.
- Trump’s less confrontational stance supported risk sentiment in the market.
- Expectations of diverging monetary policies between the Fed and ECB remain a key driver.
- Technical indicators suggest that the pair may continue its current upward trajectory.
- Key levels to watch include the resistance at 1.0500 and support at 1.0253.
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