After appreciating most of the day, late on Wednesday the EUR/USD currency pair fell sharply during the North American session. It pulled back since posting a daily peak of 1.1743. Important for USD bulls The pair fell under 1.1700 psychological support, a clear technical break that opens up the door for further downside. The shift comes after US President Donald Trump announced his administration’s decision to scrap proposed tariffs on eight European nations. This shift had lots of markets on edge in advance.
Indeed, the EUR/USD currency pair is the most traded in the world at around 30% of all foreign exchange trades. Its macroeconomic movements create ripple effects with grave implications for international finance. The Euro has experienced unprecedented strength against the Japanese Yen. Yet now it finds itself at an existential crossroads as it steers through this tumultuous stretch.
Market Reactions to Tariff Announcements
EUR/USD dropped by more than 0.30%. This decline followed shortly after Trump announced that he would not move forward with previously planned tariffs after a productive meeting with NATO Secretary General Mark Rutte. Trump stated,
“Based upon a very productive meeting that I have had with the Secretary General of NATO, Mark Rutte, we have formed the framework of a future deal with respect to Greenland and, in fact, the entire Arctic Region.”
This decision provided an immediate boost to the Euro. What it did do was raise legitimate fears regarding the long-term stability of trade relations between Europe and the United States.
“Based upon this understanding, I will not be imposing the tariffs that were scheduled to go into effect on February 1.”
Further, the Euro has flourished in part because of its higher relative interest rate. This yen depreciation has made Japan an increasingly attractive destination for global investors. The Eurozone accounted for 31% of all foreign exchange transactions in 2022, underscoring its significance in the market with an average daily turnover exceeding $2.2 trillion.
If the technical picture is bearish, a break below the 50-day SMA at 1.1662 would open up deeper support at 1.1600. Moreover, an extra help is found at the 200-day SMA, which is set at 1.1590. Should the couple exceed the 1.1700 mark traders will look to the resistance ranges following it. They’ll be keying off the January 21 high of 1.1743 and the January 20 swing high of 1.1769.
Technical Analysis and Future Support Levels
Combined with the increasing momentum, this dynamics at play indicates a possible change in trading strategies as smart investors start to evaluate these significant trading ranges. The economic docket going forward is filled with major data releases. Look out for final US Q3 2025 Gross Domestic Product, initial jobless claims, and the Fed’s favorite inflation measure—the Core Personal Consumption Expenditures (PCE) Price Index.
These swings in EUR/USD are an indicator of generalized economic health, shaped by conditions at home and abroad. This comes after surprising data showed US Pending Home Sales nosedived by 9.3% in December – their lowest readings since July. This economic downturn may additionally upend rosy economic forecasts and make investors increasingly bearish on the dollar.
Broader Economic Implications
European Central Bank (ECB) officials have similarly voiced concerns about trade battles. In her public statements, ECB’s Kocher emphasized that leveraging threats via trade policy to apply political pressure raises the stakes for the global economy. As central banks walk this tightrope, currency markets will appreciate based on underlying economic fundamentals.
European Central Bank (ECB) officials have also expressed caution regarding trade tensions. ECB’s Kocher highlighted that using trade policy threats to exert political pressure increases risks for the global economy. As central banks navigate these challenges, currency movements will continue to reflect underlying economic health.