EUR/USD ended the week down by more than 0.70%, closing Friday at 1.1688, below the key 1.1700 level. This puts it in a position to test support levels as the US dollar enjoyed its strongest week in four months. Market sentiment turned cautious due to US President Trump’s plans to expand tariffs, impacting commodities like copper. There may also be upcoming correspondence with the European Union. The economic calendar was light, featuring comments from Federal Reserve officials and Germany’s Wholesale Prices data.

Euro Under Pressure from Tariff Talks

The Euro is under pressure from Trump’s discussions about tariffs with the European Union. Chicago Fed President Goolsbee highlighted how tariffs complicate economic clarity, potentially delaying rate cuts. In the Eurozone, ECB officials had mixed opinions on monetary policy. ECB member Panetta mentioned possible easing due to heightened downside risks. Germany’s Wholesale Prices rose by 0.2% in June, reversing a previous dip. From a technical viewpoint, EUR/USD has dipped below 1.1700 but remains above the 20-day SMA at 1.1662, suggesting further declines may be ahead. Immediate support levels are at the 20-day SMA, 1.1650, and the 50-day SMA at 1.1464. The Euro is the second most traded currency, making up 31% of all foreign exchange transactions in 2022. As EUR/USD drops below the 1.1700 mark, the trend appears to be shifting downward. The breach of this psychological barrier has technical backing. The short-term outlook leans towards lower prices as long as the action stays below the 20-day moving average. The 1.1660 area, indicated by that average, should be watched closely. If it fails, the next key level is around 1.1650, with the 50-day moving average near 1.1460 serving as a significant downside target.

Market Conditions and Positioning

Traders should view last week’s US dollar rally as part of a larger trend, not just a fluke. The demand surge followed tough monetary comments from Federal Reserve officials and a shift towards caution due to increasing trade tensions from Washington. Goolsbee’s comment about tariffs affecting the economic outlook resonated, adding uncertainty around US policy—especially regarding future interest rate moves. This uncertainty often results in decreased confidence in riskier positions, boosting demand for safer currencies like the dollar. On the European side, officials have delivered inconsistent messages, preventing the Euro from finding direction. Panetta’s acknowledgment of potential easing due to downside risks raises doubts that traders can’t ignore. With lackluster growth signals and minimal support from price indicators, we are avoiding long Euro positions for now. Germany’s slight wholesale price increase of just 0.2% highlights weak inflationary pressures rather than strong momentum. Trading volume was lighter last week due to a sparse economic calendar, but that will soon change. More US data is coming, and how the dollar responds could lead to significant market shifts. The dollar’s recent gains were the highest in four months, indicating some optimism has already been priced in. Any unexpected economic results could lead to a sharp reversal. What we’re observing in EUR/USD is more than a simple level test—it represents the early stages of a pattern that will depend on how central banks balance inflation concerns amid weak data. Since the Euro accounts for nearly a third of global FX transactions, it remains vulnerable to broader market trends. The extent of negative sentiment will likely depend more on the US dollar’s direction than on Eurozone conditions. Traders using leverage should consider reducing exposure near short-term resistance or tightening stops around moving averages to avoid unnecessary losses during what may be a corrective phase for EUR/USD. Riding against strong momentum can be risky, especially since immediate news won’t likely shift sentiment drastically. Positioning becomes particularly sensitive if technical indicators align with broader macroeconomic trends in the same direction. In short, we’re not looking to buy dips here; we’re on alert for a continuation of the trend. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now