- EUR/USD tested its critical 200-day SMA and bounced back to 1.0800 and above.
- The US Dollar met renewed downside pressure on US economy concerns.
- Trump announced 25% tariffs on US imports of cars/car parts.
The Euro (EUR) slid to fresh multi-week lows near 1.0730 on Thursday before rebounding to the area above 1.0800, eventually reversing six daily pullbacks in a row. It was the first test of the key 200-day SMA since early March.
Dollar drops on US economy, tariffs
The US Dollar (USD) halted its bullish trajectory on Thursday, with the US Dollar Index (DXY) approaching the key 104.00 region as investors remained cautious over a probable loss of economic momentum in the United States (US) economy, particularly after President Donald Trump unveiled fresh 25% tariffs on US imports of autos.
Fueling the USD's climb were renewed tariff threats from President Trump, who hinted at a fresh round of 20% tariffs targeting European Union (EU) imports, possibly as early as next week.
Trade war redux? Markets stay jittery
Trump’s tough talk on trade—this time zeroing in on autos, aluminium, and pharmaceuticals—has rekindled fears of a full-blown transatlantic tariff war. While Canada and Mexico remain exempt until early April, the broader global trade outlook remains clouded.
On one hand, tariffs could force the Federal Reserve (Fed) to stay hawkish to contain inflation. On the other hand, they risk undermining global growth—especially if the EU retaliates. This duality has injected more volatility into FX markets, with the Euro squarely in the crosshairs.
Geopolitics offer a glimmer of hope for the Euro
On another front, developments in Eastern Europe offered a ray of optimism. Ukrainian President Volodymyr Zelenskiy announced earlier in the week a ceasefire covering key energy sites and Black Sea routes, with US-brokered deals helping to ease tensions on both sides.
Trump added that a US-Ukraine deal on critical mineral revenue-sharing is in the works, potentially opening the door for US firms to invest in Ukraine’s power infrastructure. While modest, these headlines helped cushion the Euro’s fall.
Central banks steady, but easing bias remains
The Federal Reserve held rates steady last week but left the door open for 50 basis points of easing later this year. Powell acknowledged tariffs were adding inflation pressure but stressed the Fed’s preference to wait for clearer data.
Across the Atlantic, the European Central Bank (ECB) cut its key rate by 25bps and hinted at more easing if uncertainty lingers. ECB projections showed softer growth and sticky near-term inflation, though policymakers still expect price pressures to ease by 2026.
ECB President Christine Lagarde also warned that a US-EU tariff escalation could shave 0.5% off Eurozone GDP, even as she praised Germany’s increased fiscal spending.
Positioning: Euro bulls sneak back in
Despite the selloff, speculative traders are cautiously adding to long Euro positions. Net longs rose for a second consecutive week to nearly 60K contracts—the highest since September 2024. Meanwhile, hedge funds expanded their overall short exposure, pushing total contracts to 92.4K, per the latest CFTC report.
EUR/USD technical snapshot
- Resistance Levels: Key resistance starts at 1.0954 (March 18 YTD high), followed by 1.0969 (23.6% Fib retracement). A clean break above 1.1000 would mark a psychological turning point.
- Support Zones: Immediate support lies at the 200-day SMA (1.0729). Below that, look for the 55-day SMA at 1.0540, 100-day SMA at 1.0518, and February 28’s low at 1.0359. A deeper downside could test 1.0282 and 1.0176.
- Momentum Indicators: RSI around 56 reflects strengthening bullish momentum, while an ADX reading near 25 suggests somewhat shrinking trend strength.
EUR/USD daily chart
What to watch
EUR/USD remains highly sensitive to geopolitical shifts, trade policy headlines, and central bank cues. Developments around the Russia-Ukraine truce, German fiscal spending, and any further Fed/ECB signals will be key in shaping the pair’s near-term direction.
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