- The euro fell near a seven-month low on Tuesday.
- Trump is likely to impose higher tariffs on goods imported from the Eurozone.
- Market participants await October inflation data in the US.
The EUR/USD outlook shows a sharp decline as the euro suffers from the prospect of higher US import tariffs. Meanwhile, the dollar surged as Trump’s victory gave a bright outlook for the US economy, dampening Fed rate cut expectations.
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The euro fell near a seven-month low as investors sold the currency following Trump’s presidential victory. Trump is likely to impose higher tariffs on goods imported from the Eurozone. Such an outcome will significantly harm the Eurozone economy.
On the other hand, it will boost the American economy as local businesses will flourish. At the same time, Trump’s proposal for a significant tax cut will improve business conditions. A stronger economy will lead to higher inflation. The Federal Reserve has recently turned from raising interest rates to cutting interest rates.
The US central bank has raised interest rates to reduce rampant inflation. Although price pressures have eased significantly from the peaks, the journey is not yet over. Inflation remains above the Fed’s 2% target. Still, policymakers voted to start cutting rates because all indicators showed that inflation was on a downward trend and would soon reach the target.
Unfortunately, that outlook might change with a Trump victory. Now there is a chance that inflation will start to rise before it reaches the target. Consequently, the Fed may become more cautious about cutting rates.
Meanwhile, market participants await October’s US inflation data for further clues on whether the Fed will taper in December. Traders are currently pricing in a less than 69% chance of a December rate cut.
EUR/USD key events today
Neither the US nor the Eurozone will release high-impact economic reports. Therefore, the markets will continue to digest a Trump victory.
Technical Outlook for EUR/USD: Support at 1.0600 eyeing a new downtrend
From the technical side, EUR/USD price broke below support at 1.0700 to make a new low in the downtrend. Consequently, the bearish bias has strengthened as there is a lower high and a lower low. At the same time, the price respects the 30-SMA as resistance and the RSI is in the oversold region, suggesting solid bearish momentum.
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The trend reversed when the price made a strong evening star candlestick pattern. If the new trend continues, EUR/USD will soon break below the 1.0600 support level.
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