The pair remains range-bound, moving in a confined price corridor. Buyers are struggling to establish a firm position at the 1.03 level, while sellers are unable to drive the pair down to the 1.02 level. Conflicting inflation reports and rumors suggesting that Donald Trump may gradually implement tariffs have helped buyers pause the downward trend of the EUR/USD. However, the recently published Consumer Price Index (CPI) and Producer Price Index (PPI) still indicate rising overall inflation, which has hindered the bulls from taking control of the pair, resulting in only a modest corrective rebound. This current standoff highlights the inactivity of both buyers and sellers.

In my opinion, the market is not at a crossroads between further declines and a potential reversal upward. The downward trend is currently on pause, but this is merely a temporary halt, not a definitive end. Market participants are awaiting significant events in January, particularly Donald Trump's initial decisions as the new U.S. president. Additionally, there is ongoing uncertainty regarding how the Federal Reserve will interpret the latest inflation reports. This makes the Fed's meeting scheduled for January 28–29 a critical event, despite expectations that the formal outcome (status quo) is already predetermined.

This week, the dollar has faced pressure for two main reasons. The "red tint" in the inflation reports, particularly some components. For instance, the core CPI fell short of expectations, slowing slightly to 3.2% year-over-year, compared to a forecast of 3.3%. Meanwhile, the headline CPI matched expectations by rising to its highest level since July 2024.

Additionally, the PPI, released a day earlier, presented a mixed picture. The headline PPI increased to 3.3%, the fastest pace since March 2023. However, the core PPI remained steady at 3.5% in December, falling below market expectations of 3.8%. Traders interpreted this data as unfavorable for the dollar, even though consumer inflation in the U.S. continues to rise.

From a broader perspective, consumer inflation trends in the U.S. continue to rise, making any major dovish shifts unlikely. CME FedWatch data supports this, showing that market expectations for changes in monetary policy have remained largely unchanged following the CPI and PPI reports. Traders are still expecting the Fed to maintain its current policy stance during its January meeting, with a 75% probability of that outcome also occurring in March. However, the likelihood of a pause in May has slightly decreased from 62% to 56%. Nevertheless, it's still too early to discuss such distant prospects.

This indicates that the inflation reports generally support the dollar. While the "red tint" of the data caused some hesitation, traders do not appear to harbor illusions about inflation trends in the U.S.

In relation to Donald Trump's likely decisions, the dollar faced pressure after Bloomberg reported that the new U.S. presidential administration would gradually increase trade tariffs instead of imposing significant duties all at once. Several representatives from the president-elect's team believe that this approach will help prevent a surge in inflation in the U.S.

EUR/USD buyers responded positively to recent rumors suggesting that a gradual tariff strategy could enable the Fed to cut interest rates more aggressively without being hindered by inflation concerns. However, it's important to note that the key word here is "if." Previously, Trump had threatened to impose minimum tariffs of 10–20% on all imports and as high as 60% on goods from China. The "gradual approach" has never been explicitly mentioned by Trump, and even if the insider report is accurate, this strategy is still in development and has not yet been presented to the president-elect. Therefore, it's premature to draw any firm conclusions.

In summary, there are currently no strong reasons to expect sustained growth for EUR/USD. Likewise, there is no compelling basis for a steady decline toward the 1.02 level. Until Trump's inauguration on January 20, it is likely that the pair will fluctuate within a narrow range, reflecting uncertainty among buyers and sellers. In this uncertain environment, both buying and selling EUR/USD involve significant risk. The resistance level is at 1.0340, which corresponds to the middle line of the Bollinger Bands indicator on the daily chart. The support level is at 1.0230, represented by the lower line of the Bollinger Bands on the same time frame.