EUR/USD currency pair was quite volatile over the past few days, with the support bubble at recent lows of 1.1650. This morning the duo met buyers close to the somewhat bullish 20 Simple Moving Average (SMA) located at 1.1660. Growing trade protectionism is fuelling these protests. This move comes on the heels of US President Donald Trump’s announcement that he was planning to impose similar tariffs on Mexico and the European Union.
In recent trading days the EUR/USD has looked weak. The longer-term moving averages have a neutral-to-bullish gradient. They are still short of the short averages indicating a possible weakening trend. Further, the development of those lower lows indicates a potential down extension towards the 1.1600 area if the present pressure continues.
Daily Technical analysis indicates a mildly bullish 20 SMA at 1.1660. This level is the most important support barrier, making it extremely vital. Market analysts have identified several support levels for EUR/USD: 1.1650, 1.1620, and 1.1590. On the flip side, significant resistance levels are at 1.1700, 1.1730, and 1.1770, making it difficult for bullish movements to flourish.
The 4-hour chart presents a quite bearish 20 SMA crossing a bullish 100 SMA around 1.1700. This convergence of technical indicators forms a jungle of intraday resistance that traders must push through to rally into a more convincing recovery. This trifecta of technical indicators means that despite the clear presence of buyers, they might have to deal with some hefty hurdles in the near-term.
Further complicating matters is the current market environment, exacerbated by destabilizing geopolitical tensions resulting from President Trump’s recent threats to impose even more tariffs. Beginning August 1, US and European economies will be hit with an immediate 30% tariff on all goods imported from Mexico and the EU. This big tax burden could be felt very deeply in trade. Not only has this development introduced uncertainty into the financial markets, but it may directly affect the EUR/USD exchange rate.
Trump’s recent letters to European Commission President Ursula von der Leyen and Mexican President Claudia Sheinbaum have stoked that alarm. What are the implications for currency values? Economic stakeholders are understandably nervous over how these trade policies might affect currency valuations.
“30%, or anything above 30%… has more or less the same effect. So, practically it prohibits the trade,” – Maroš Šefčovič
This has indeed been amply remarked upon by market analysts looking at the macroeconomic calendar for both regions. They are very interested in the upcoming release of the US June Consumer Price Index (CPI) this Tuesday. This report has the potential to move the EUR/USD pair considerably as traders react to inflation numbers and re-position themselves in a short-to-medium term view.
With the currency pair treading these delicate justifications, technical indicators are more mixed. They suggest a potential retreat from the annual peak of 1.1830. At the same time, they disclose the deep uncertainties and risks still lingering in the market.