## The Eurozone and the Impact of Tariffs With the United States applying a 30% tariff on imports from the European Union starting August 1st, the Euro has weakened against the Dollar. If the U.S. responds with similar measures toward Mexican exports, it could further affect the Euro. These trade tensions are putting pressure on the shared currency, attracting attention from traders and affecting forward contract prices. Currently, the EUR/USD exchange rate is around 1.1670, with some support near its 20-day exponential moving average at 1.1660. However, this support is fragile. The drop in the Relative Strength Index indicates that buyers are losing interest, which suggests they are hesitant to invest at these levels. If buyers do not return strongly, there could be more downside risks. If the rate falls below 1.1573, it could lead to more selling, driving the exchange rate toward 1.1454 and eventually 1.1400. These levels are significant as they are previous points where buyers had stepped in. A move below these levels could lead to a reevaluation of risk management strategies, especially for those with positions extending beyond immediate trading. ## Critical CPI Data Impact On the other hand, if the EUR/USD rises and stays above 1.1830—potentially due to weaker U.S. inflation data or changes in market sentiment—then buyers may set their sights on 1.1900 and, ultimately, 1.2000. These levels act as resistance, and whether the upward trend continues will depend on inflation reports and comments from Federal Reserve officials. The Consumer Price Index (CPI) data for June in the U.S. will be a key indicator for the Dollar. Despite the Euro’s current weaknesses, the Dollar reacts significantly to domestic inflation changes, which can alter the market’s direction. Attention will be on whether core inflation supports the Federal Reserve’s cautious approach or revives discussions about monetary easing. From our perspective, the Euro is sensitive to any policy changes from the European Central Bank (ECB). The Euro serves nineteen countries, and its value responds swiftly to trade shifts and inflation trends. New data from the Eurozone’s balance of goods and services could lead to short-term market fluctuations based on unexpected economic news. The market is aware that higher inflation in the Eurozone might push ECB President Lagarde and her team toward tighter interest rates. We have seen this happen before, particularly when unemployment remains stable and business confidence stays high. However, weak growth or poor sentiment might limit their options. If interest rates stop increasing, the differences in yields could lead to adjustments in Dollar-based investments. For traders dealing with derivatives, it’s essential to evaluate positions at the key levels of 1.1573 and 1.1830. These thresholds are likely to play a significant role in the near future, especially during major news releases. With tariffs disrupting trade flows, traders might need to reassess their current strategies. Maintaining tight exposure while allowing for growth after major events could help manage risks associated with unexpected market movements. Positions based on current option pricing can still yield good returns, but only if entry points are well-timed. Create your live VT Markets account and start trading now.

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