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17.02.2025 12:20 AMLast week, EUR/USD tested the 1.0500 level but failed to consolidate above this key resistance (the upper line of the Bollinger Bands indicator on the D1 timeframe). The pair's impulsive growth was driven by increased risk appetite after Trump decided not to immediately impose reciprocal tariffs. Instead, the U.S. president signed a memorandum to prepare for "mutual tariffs." It also became known that tariffs would not be uniform for all countries, as initially expected—the tax burden will be determined individually for each nation. A working group is expected to study this issue until April, after which Trump will make decisions on a country-by-country basis.
The market breathed a sigh of relief, even though the issue has not been removed from the agenda—it has merely been postponed for a few months. Still, this was enough for market participants to regain optimism ("not today, and that's a relief"), boosting risk appetite and putting pressure on the safe-haven dollar, allowing EUR/USD to test the 1.0500 level.
However, the situation could change dramatically. According to inside sources cited by the Financial Times, Brussels is preparing a retaliatory move against the U.S. by banning the import of certain American food products. Rumors suggest that in the initial phase, the ban could target soybeans grown with pesticides prohibited in the EU. If the EU takes countermeasures, risk-off sentiment could return to the market, increasing demand for the dollar.
The economic calendar for the upcoming week is not dense with major events, but it is not empty either.
On Monday, two Federal Reserve officials are scheduled to speak: Philadelphia Fed President Patrick Harker and Fed Governor Michelle Bowman. Traders are expected to focus more on Bowman's remarks, as Harker does not have a voting right this year and is set to retire in June after completing the maximum 10-year term. As a result, his speech is likely to be overlooked by the market.
In contrast, Bowman has the potential to trigger market volatility. During her last public appearance at the end of January, she emphasized that the Fed's future actions should be "cautious and gradual, as inflation remains high with upside risks." It's important to note that she made these comments before the latest Consumer Price Index (CPI) and Producer Price Index (PPI) reports, which indicated an acceleration in inflation in January.
On Tuesday, Germany will release its February ZEW indices. The business sentiment index in Germany is expected to rise to 19.9 points, the highest level since July 2024, following a decline to 10.3 in January. The broader European ZEW economic sentiment index is also expected to show positive dynamics, climbing to 24.3 points.
Key speakers on Tuesday include San Francisco Fed President Mary Daly, who has a voting right this year, and Fed Governor Michael Barr, who has a permanent voting right due to his position. They are likely to comment on the latest inflation data and assess the outlook for further monetary easing this year.
On Wednesday, the Fed will release the minutes from its January meeting. During that meeting, the Fed decided to keep all monetary policy parameters unchanged. Fed Chair Jerome Powell indicated that the central bank should not rush to adjust its monetary policy since inflation remains elevated, and the U.S. economy is doing well. Furthermore, the Fed removed the phrase that inflation had "made progress toward the 2% target" and instead stated that inflation "remains elevated." This change was seen as hawkish, reflecting the Fed's concerns over recent inflation reports. Powell attempted to downplay the significance of this adjustment, referring to it as a "technical adjustment" without deeper implications. As a result, the FOMC minutes will be closely scrutinized; if the document conveys a hawkish tone, the dollar could receive substantial support, especially considering the latest CPI and PPI reports.
On Thursday, several important macroeconomic reports will be released during the U.S. session, although they are considered secondary. One key report will be the February reading of the Philadelphia Fed Manufacturing Index. Preliminary forecasts suggest a significant decline in the index, dropping from 44.3 to 19.4. If the reading is weaker than expected, it could put pressure on the U.S. dollar.
Additionally, weekly jobless claims data will be published. Last week, the indicator came in at +213,000, and it is expected to remain almost unchanged at +214,000 for the upcoming week. This report will only impact EUR/USD if the actual figure significantly deviates from the forecast.
Thursday's Fed speakers include Vice Chair Philip Jefferson, St. Louis Fed President Alberto Musalem (who has a voting right in 2025), and Chicago Fed President Austan Goolsbee (who also has a voting right this year).
The last trading day of the week will feature the release of PMI indices. According to forecasts, business activity indices in Germany's manufacturing sector and the broader eurozone are expected to remain in contraction territory but show slight improvements (to 45.4 and 46.9, respectively). In the services sector, the opposite is expected—the indices should remain above the 50-point threshold but show a slight decline (52.4 and 51.1). A significant deviation from these forecasts, especially to the downside, could increase volatility in EUR/USD.
During the U.S. session on Friday, the ISM Manufacturing PMI will be released. The index is expected to remain at its January level of 51.2. For dollar bulls, it is crucial that this indicator does not fall below the 50-point threshold, which would signal contraction.
Traders should pay attention to the University of Michigan Consumer Sentiment Index, which measures consumer confidence in both the current and future state of the economy. The index has been declining for the past two months, and February may see a third consecutive drop, with expectations lowering to 67.2 points. An unexpected rise in the index could provide broad support for the dollar.
From a technical perspective, the EUR/USD pair on the daily chart remains within the Kumo cloud and is fluctuating between the middle and upper lines of the Bollinger Bands indicator. Long positions should be considered only if the pair consolidates above the upper boundary of the Kumo cloud, which would trigger a bullish "Parade of Lines" signal on the Ichimoku indicator and pave the way toward the 1.06 area. Conversely, short positions would be relevant only if the pair drops below 1.0390, placing it between the middle and lower lines of the Bollinger Bands and beneath all Ichimoku lines on the D1 timeframe.
