The EUR/USD pair is going down while the US Dollar gets stronger, boosted by rising US Treasury yields. With the trade deadline on July 9, there’s renewed interest in the safe-haven status of the Dollar, causing the Euro to trade below 1.1720 in the European session. German Industrial Production unexpectedly grew by 1.2% in May, but Eurozone Retail Sales showed a 0.7% drop for the same month. Adding to the uncertainty in the market, U.S. President Trump’s upcoming tariffs and a potential trade deal have made traders cautious.

Trade Strategy Focus

Trump’s tariff focus is on Mexico, China, and Canada, aiming to strengthen the US economy. In 2024, these three countries made up 42% of US imports. The EUR/USD pair is under bearish pressure, with support expected around 1.1715 and resistance at 1.1790. In June, US private payrolls grew by 147,000, while the unemployment rate dropped to 4.1%. These figures have lowered expectations for a Federal Reserve interest rate cut in July. There continues to be debate over the economic impact of tariffs. The recent decline in the EUR/USD pair aligns with changing market views rather than surprising data. The drop below 1.1720 coincided with rising Treasury yields and increased investments in Dollar assets. This rise in US yields typically strengthens the Dollar, as higher returns attract investors away from currencies like the Euro. Despite stronger-than-expected German production data, sentiment hasn’t shifted much. The 1.2% growth indicates some resilience in industry, but consumption remains a concern. The 0.7% drop in Eurozone Retail Sales points to weaker demand, which is critical as retail trends can indicate broader economic growth, especially in a currency area facing political and economic challenges.

Concerns Around Trade Policies

Concerns about U.S. trade policies are still prevalent. With the July 9 deadline approaching, trade tensions are back in focus, and the language around policies has not calmed market nerves. The potential for further tariffs, especially against Mexico, China, and Canada, keeps traders on edge. Last year, these three countries represented 42% of US imports, meaning any disruption could have significant consequences. Recent labor data has also supported the Dollar. Private payrolls for June were at 147,000—an acceptable figure—but combined with a drop in unemployment to 4.1%, this has lowered expectations for a near-term rate cut. The Federal Reserve typically reacts decisively to weak job data or inflation issues, but currently, neither is a concern for them. With decreased chances of a rate cut, shorting the Dollar seems less attractive in the short term. Support for the EUR/USD pair is around 1.1715, just below today’s trading level, where previous bids offered some protection. If the downward pressure continues, traders may look further south, but any significant climb needs to break through resistance near 1.1790, which has limited upward movement this week. Looking forward, attention will remain on upcoming trade announcements and their effects on the market. Since expectations for a rate shift in the US have cooled, currencies may react more to news rather than fundamentals for the time being. Traders might want to be cautious about options pricing in the next two weeks. As implied volatility reacts to geopolitical and policy risks, premiums may increase. Therefore, revisiting short-dated, out-of-the-money strategies—especially those sensitive to headlines—may be worthwhile. Create your live VT Markets account and start trading now.

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