EUR/USD Navigates Central Bank Caution and Geopolitical Tensions

EUR/USD gained more than 100 pips from the minor bottom of 1.14887.  It hit an intraday high of 1.14889 and currently trading around 1.14642.

ECB's Cautious Stance: Flexibility and Vigilance

Joachim Nagel, the Bundesbank President, and Luis de Guindos, Vice President of the ECB, both express a message of careful flexibility for the European Central Bank's (ECBO) monetary policy, emphasizing data dependence and increased caution against inflationary risks. According to Nagel, the ECB has achieved its target of 2% inflation, but due to uncertainties caused by geopolitical events and global trade tensions, it must refrain from making definitive statements on future rate determinations. De Guindos, after a period of robust and aggressive monetary growth, stated that although all policy instruments are still available, the ECB is now more aware of its limitations and potential risks, particularly regarding financial stability and asset bubbles.

Trump vs. Fed: The Battle Over Interest Rates

Despite his administration's tariff and immigration policies, President Donald Trump is exerting pressure on the Federal Reserve to implement a full percentage point cut in interest rates, citing concerns that high borrowing costs and slow economic growth are directly linked. Although Trump has frequently expressed his disapproval of Jerome Powell, the Fed has continued to maintain rates, emphasizing a data-driven approach and cautioning against excessive pressure on rates due to inflationary pressures, unpredictable trade policy developments, and recent oil price increases. The Supreme Court's recent ruling upholding the structural autonomy of the Fed underscored the agency's steadfast commitment to independence, as political pressures won't result in unpredictable decisions for markets and consumers.

The pair is holding above short and long-term moving averages in the 4-hour chart. Near-term resistance is seen at 1.1600; a break above this may push the pair to targets of  1.1635/1.1660.  Major bullish momentum is likely only if prices are able to break above the 1.160 target of 1.1660. On the downside, support is seen at 1.1525 any violation below will drag the pair to 1.1480/1.1435/1.135/1.1300/1.1265.

Market Indicators and Trading Strategy

Commodity Channel Index (CCI)-  Bullish

Average Directional Movement Index (ADX) - Bullish

 It is good to buy on dips around 1.1548-50 with a stop-loss at 1.1500 for a target price of 1.1660.