This week our eyes are still on the dollar with the ongoing tariffs, but we will also be looking at the euro as we have lots of news regarding the euro aswell as the German national elections.

Economic calendar highlights:

Eurozone:

• German Ifo Business Climate Survey (February 24): This survey assesses the current business environment and expectations for the next six months, providing insights into the health of Europe’s largest economy.
• Eurozone Consumer Price Index (CPI) Flash Estimate (February 29): An early estimate of inflation, this figure is crucial for anticipating European Central Bank (ECB) policy decisions.

United States:

• Personal Consumption Expenditures (PCE) Price Index (February 28): As the Federal Reserve’s preferred inflation gauge, this release will be closely monitored for signs of inflationary pressures.
• Gross Domestic Product (GDP) Second Estimate (February 27): This provides a revised look at economic growth in the fourth quarter of 2024, offering insights into the economy’s momentum.

Fundamental analysis:

Eurozone:

The recent victory of the conservative CDU/CSU bloc in Germany’s national election has provided a boost to the euro, which reached a one-month high of $1.0528. Market participants are now focusing on the formation of a coalition government and potential fiscal reforms, including modifications to the “debt brake” that limits Germany’s budget deficit. Additionally, ECB policymaker Pierre Wunsch has cautioned against “sleepwalking” into excessive rate cuts, emphasizing the need for data-driven monetary policy decisions.

United States:

The U.S. economy continues to send mixed signals. A sharp decline in the services PMI, coupled with a spike in consumer inflation expectations, has raised concerns about the Federal Reserve’s next moves. While inflation remains above target, economic growth appears solid, leading to cautious optimism among investors. Upcoming data releases, particularly the PCE Price Index and GDP figures, will be pivotal in shaping expectations for future monetary policy adjustments

Technical analysis:

Here we are looking at EURUSD on the 4-hour chart:

The EUR/USD pair is currently reacting to a significant resistance level, aligning with the ongoing German national elections. This political event introduces uncertainty, which could drive volatility in the euro.

The chart highlights key structural levels that must break for a sustained bearish trend to develop. Until these levels are violated, a long-term short bias remains premature.

Additionally, this week presents several high-impact economic events (“red folder” news) for the Eurozone, which are likely to influence market sentiment. As we approach a new trading month, these fundamental catalysts may provide further clarity on the euro’s direction

Given the current market structure and recent impulsive moves breaking out of the previous consolidation zone, traders can look for short-term scalping opportunities in both buy and sell directions. Monitoring price action at key levels will be crucial in navigating this week’s volatility.

Closing thoughts:

As we move through the final week of February, market volatility remains elevated, with both fundamental and technical factors shaping price action. The outcome of Germany’s national elections, alongside key economic releases such as the Eurozone CPI and U.S. PCE Price Index, will provide critical insights into the future direction of monetary policy on both sides of the Atlantic.

For traders, adaptability is key. With high-impact news events ahead, short-term opportunities in both bullish and bearish directions may emerge, particularly for EUR/USD. Staying informed, managing risk effectively, and watching for confirmation at key technical levels will be essential in capitalizing on market moves.

As we transition into a new trading month, the focus will remain on central bank decisions, economic performance, and geopolitical developments—all of which will continue to drive sentiment and price action. Stay prepared, stay disciplined, and trade with confidence.