EUR/USD gains momentum and climbs above 1.0500 during Tuesday’s European session. Renewed US recession concerns weigh on the US Dollar, supporting the pair’s recovery despite escalating trade war fears. Market attention stays on Trump’s tariffs and comments from Federal Reserve officials.
After closing the previous week on a bearish note, EUR/USD regained momentum on Monday, surging over 1% in a single day. The pair continues its upward trajectory in Tuesday’s European session, trading above 1.0500.
The 4-hour Relative Strength Index (RSI) has climbed above 60, indicating strengthening bullish momentum. EUR/USD is currently hovering around 1.0500-1.0520, a key area marked by the 78.6% Fibonacci retracement of the latest downtrend, the 100-day Simple Moving Average (SMA), and a static support level. If this zone is confirmed as support, the next resistance levels are seen at 1.0550, followed by 1.0600, which marks the starting point of the recent downtrend.
On the downside, support is expected at 1.0440-1.0435 (aligned with the 61.8% Fibonacci retracement and the 20-day SMA), with additional support around 1.0400-1.0410 (200-period SMA and 50% Fibonacci retracement).
The US Dollar (USD) weakened in the American session on Monday after disappointing ISM Manufacturing PMI data signaled slowing growth in the manufacturing sector. The headline PMI declined to 50.3 in February from 50.9 in January, indicating a loss of momentum. Additionally, the Employment Index fell sharply to 47.6 from 50.3, reflecting a contraction in payrolls. Meanwhile, US Construction Spending dropped by 0.2% in January, adding to concerns over economic activity.
Following these data releases, the Federal Reserve Bank of Atlanta downgraded its GDP growth projection in the GDPNow report, lowering its first-quarter forecast from -1.5% to -2.8%. The report cited weaker personal consumption and private fixed investment growth, which were revised down to 0.0% and 0.1%, respectively.
Adding to the market’s concerns, US President Donald Trump’s 25% tariffs on Canadian and Mexican imports, along with an additional 10% on Chinese goods, took effect early Tuesday. In response, Canada and China announced retaliatory measures, increasing fears of an economic downturn in the US. As a result, the USD remained under pressure, Wall Street’s main indexes declined sharply, and the benchmark 10-year US Treasury bond yield fell below 4.2%, its lowest level since early December.
With no high-tier economic data releases scheduled for Tuesday, the USD’s recovery prospects remain uncertain. However, if the Trump administration signals a willingness to negotiate on tariffs, easing recession fears, the USD could regain some lost ground.
