Fundamentals and technical factors point to EURUSD weakening

EURUSD paused its two-day decline. However, the currency pair remains under pressure due to cautious investor sentiment ahead of the Federal Reserve's interest rate decision.

The US dollar is gaining support amid expectations that the Fed's interest rate will remain in the 4.25-4.50% range, according to CME FedWatch. Although the decision has already been priced in, the key event will be the press conference of Fed Chair Jerome Powell. During the event, markets will be looking for signals regarding the path forward for interest rates.

US President Donald Trump's trade policy is giving additional momentum to the dollar. On Monday, he announced his plans to impose tariffs on imports of computer chips, pharmaceuticals, steel, aluminum and copper, which is aimed at supporting US manufacturing. These measures raise inflation expectations and may affect future Fed decisions.

The situation in the eurozone remains difficult. Expectations for European Central Bank interest rate cuts by 25 basis points to 2.75% are putting pressure on the euro. This is driven by weak economic data in the region and confidence that inflation is on its way back to the 2% target. As this decline is already priced in, investors' attention is focused on the comments by ECB President Christine Lagarde. Her rhetoric, especially in the context of the possible impact of Trump's tariff policy on the European economy, will determine the future euro dynamics.

From a technical point of view, the EURUSD currency pair is forming a new trend after exiting the downtrend on the daily chart (D1). According to the wave analysis, the price is in the process of forming the first ascending wave on the H4 timeframe after exiting the channel. The first wave completion will be confirmed if the price breaks the support of the current uptrend. In this case, the second descending wave will be formed. However, Bulls Power and Bears Power indicators (standard settings) are already showing negative values, signaling a bearish sentiment in the market. 

Signal:

The short-term outlook for EURUSD suggests selling. 

The target is at the level of 1.0260.

Part of the profit should be taken near the level of 1.0350.

A Stop Loss could be placed at the level of 1.0570.

The bearish trend is short-term, so a trading volume should not exceed 2% of your balance.