EUR/USD recovers as investors brush off concerns over Trump’s tariff threats
FUNDAMENTAL OVERVIEW:
- EUR/USD rebounds from intraday losses, climbing above 1.0300 as investors brush off US President Trump’s tariff threats.
- Trump is set to implement 25% tariffs on all aluminum and steel imports.
- Market participants are also awaiting ECB President Lagarde’s speech on Monday and Fed Chairman Powell’s testimony later in the week.
The major currency started the day on a weak note as investors flocked to safe-haven assets amid renewed concerns over US President Donald Trump’s tariff plans. The US Dollar Index (DXY), which measures the Greenback’s value against six major currencies, has reversed its intraday gains and is fluctuating around 108.10.
Over the weekend, President Trump threatened to impose a 25% tariff on steel and aluminum imports, along with reciprocal tariffs on countries he deems engaged in unfair trade practices. Canada, the largest exporter of aluminum to the US, is expected to be the most affected by this decision. Other major exporters like Mexico, Brazil, Vietnam, and South Korea will also bear the brunt of these increased levies.
The impact of these reciprocal tariffs is expected to be severe for the Eurozone, which currently imposes a 10% tariff on US automobile imports while only paying a 2.5% import duty on its vehicles. This scenario could further weaken the Euro (EUR), already under pressure from risks of economic contraction and inflation falling short of the European Central Bank’s (ECB) 2% target.
This week, the key catalyst for the US Dollar will be the release of the January Consumer Price Index (CPI) data on Wednesday. Investors will also closely monitor Fed Chair Jerome Powell’s testimony before Congress on Tuesday and Wednesday.
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EUR/USD TECHNICAL ANALYSIS CHART:
Technical Overview:
EUR/USD is trading within a down channel.
EUR/USD is moving below all the Moving Averages (SMA).
The Relative Strength Index (RSI) is in the Selling Zone, while the Stochastic oscillator suggests a Neutral trend.
Immediate Resistance level: 1.0358
Immediate support level: 1.0283
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HOW TO TRADE EUR/USD
The EUR/USD pair, after a persistent decline, found support and surged upward. However, the price failed to maintain its upward momentum as it encountered resistance and retraced. At present, EUR/USD made another attempt to move higher, but once again, it couldn’t sustain its strength and has dropped below the support zone. Currently, the pair is correcting upward toward the resistance zone. If it faces rejection at this resistance, the price may resume its downward movement.