The EUR/USD is on the cusp of a major breakout, but which way will it go?
As of Wednesday's European trading session, the EUR/USD currency pair is showing a slight upward movement, trading approximately 0.27% higher and hovering near the 1.1800 mark. This uptick for the Euro comes as the US Dollar (USD) experiences a dip. A key factor influencing this decline in the Greenback is United States President Donald Trump's recent State of the Union address.
At the moment, the US Dollar Index (DXY), which is a benchmark for the dollar's strength against a basket of six major currencies, is down by about 0.2%, currently sitting around 97.65.
US Dollar's Performance Today: A Mixed Bag
The table below illustrates how the US Dollar has fared against other major currencies today. It appears the Australian Dollar (AUD) has been the strongest performer against the USD, with the USD showing the weakest performance against it.
| Currency | USD Change |
|---|---|---|
| USD vs EUR | -0.23% |
| USD vs GBP | -0.17% |
| USD vs JPY | -0.06% |
| USD vs CAD | -0.18% |
| USD vs AUD | -0.67% |
| USD vs NZD | -0.32% |
| USD vs CHF | -0.14% |
This heat map visually represents the percentage changes between major currencies. The currency in the left column is the base currency, and the currency in the top row is the quote currency. For instance, the change shown for USD/JPY indicates the percentage change of the US Dollar when paired with the Japanese Yen.
During his address to Congress, President Trump highlighted his administration's economic successes and voiced his disapproval of the Supreme Court's decision regarding his tariff policy, calling it 'unfortunate' given its perceived role in the economic recovery.
But here's where it gets interesting for the US Dollar's future: The broader economic outlook for the USD remains positive. This is largely because the Federal Reserve (Fed) is not expected to lower interest rates in its upcoming policy meetings in March and April.
Meanwhile, the Euro is looking to a key economic indicator. The Euro is trading higher in anticipation of the preliminary German Harmonized Index of Consumer Prices (HICP) data for February, scheduled for release on Friday. This inflation measure is projected to show a 0.5% increase month-on-month, a notable shift from January's 0.1% decline. The annual inflation rate is also expected to see a steady rise to 2.1%.
EUR/USD Technical Outlook: A Triangle in Formation
Technically, the EUR/USD pair is currently trading around 1.1805. The 14-day Relative Strength Index (RSI) is oscillating between 40.00 and 60.00, suggesting a state of balance in the market. The price is also hovering near the 20-day Exponential Moving Average (EMA) at 1.1800, which typically indicates a sideways trading trend.
And this is the part most people miss: The EUR/USD pair is nearing a critical point where it could decisively break out of a Descending Triangle pattern on the daily chart. A close above the February 23 high of 1.1835 could propel the pair towards the significant 1.1900 level. Conversely, a break below the February 19 low of 1.1742 might see the pair fall towards the January 22 low of 1.1670.
What do you think? Does President Trump's rhetoric truly drive currency markets, or are fundamental economic factors like Fed policy the real movers? And in the case of EUR/USD, is a breakout from this descending triangle inevitable, or is it just a temporary pause before further consolidation? Let us know your thoughts in the comments below!
