During the North American trading session on Friday, EUR/USD bounced back after briefly dipping below 1.1300. This occurred after US President Donald Trump announced a 50% tariff on the EU, set to start on June 1, 2025. The pair hit a low of 1.1296 but quickly recovered to around 1.1350 as worries about rising US fiscal deficits affected the US Dollar. US Treasury Secretary Scott Bessent criticized EU proposals, adding more pressure on the US Dollar. The US tax bill, which might lead to an additional $4 trillion in debt over the next ten years, also contributed to the downward pressure. In contrast, the Euro gained support from Germany’s stronger GDP figures, which showed yearly growth even if quarterly results were still negative.

Euro’s Momentum and Market Dynamics

US economic data was mixed; while Building Permits decreased, New Home Sales rose, showing continued demand despite limited availability. EUR/USD is technically on an upward trend, reaching a two-week high at 1.1375. If it breaks above 1.1400, the next resistance levels to watch are 1.1450 and 1.1500. However, if it drops below 1.1300, it may retest the May 22 low of 1.1255. The Euro is gaining strength as sentiment shifts to “sell America,” leading to declines in US bonds and equities amid trade tensions and a recent downgrade of US debt. Currently, EUR/USD is showing strong upward momentum, driven by concerns over US fiscal policies and a change in global sentiment. The earlier dip below 1.1300 was brief and lacked strong momentum to push lower. The quick recovery above 1.1350 suggests that traders are not ready to adopt a bearish outlook at this time. The rise to 1.1375 reinforces the idea that interest in the Euro is not just a temporary reaction but a growing trend. Trump’s tariff announcement for mid-2025, although significant, will take time to implement. Nonetheless, the potential for future trade barriers has already begun influencing capital movements. The notable reaction in US assets shows that investors are responding to anticipated uncertainties today. Bessent’s statements, while politically charged, have had real market implications. This has led to increased Euro interest due to instability concerns surrounding American fiscal policy. Additionally, the Euro’s strength stems not just from a weaker Dollar but also from stable European data. Even though Germany’s quarterly GDP might be down, its yearly growth offers reassurance. Traders seek any positive signs to counteract global worries, and even slight improvements in significant export economies can encourage a shift back to the Euro.

Watching Key Levels in EUR/USD

In the US, mixed housing data have provided little support for the Dollar. Falling building permits hint at potential weaknesses in construction, while rising new home sales show strong demand against limited supply. These inconsistencies highlight a broader narrative suggesting that while the US economy is resilient, it may be nearing a tipping point where fiscal challenges and interest rates become problematic. Looking at price levels, 1.1400 appears vulnerable. There is a clear chance to test 1.1450 or even 1.1500 if the momentum stays strong and US data remains unhelpful. Conversely, if 1.1300 breaks again without recovery, May’s low of 1.1255 becomes relevant, especially with ongoing macroeconomic pressures. For those focused on interest rates and policy differences, this market has evolved beyond a single-variable focus. There are now more traders betting against US government securities, and they are doing so in significant volumes. This shift isn’t only about domestic inflation or job numbers anymore; the US debt downgrade has triggered concerns about long-term returns on US fixed-income assets. As broad equity weakness aligns with declines in sovereign debt markets, the trend continues to favor currencies that aren’t directly affected by these issues. The Euro, despite its own challenges, currently appears to present fewer structural risks. For now, it’s crucial to watch 1.1375 and observe how prices act around 1.1400. Any sustained move above this range should be seen as a continuation rather than an overreach. On pullbacks, the focus will be on the 50-day moving average, currently just above 1.1300, which has held as support recently and could do so again. We believe that short-term trades should prioritize acceleration rather than reversal until a new factor disrupts the existing balance. Create your live VT Markets account and start trading now.

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