- EUR/USD tested the 1.1100 region, erasing those gains afterwards.
- The US Dollar made a U-turn and traded with decent gains on Trump’s news.
- Trump said 125% tariffs on China will kick in on April 10.
The Euro (EUR) gave away most of its gains on Wednesday, prompting EUR/USD to fade the initial uptick to as high as the boundaries of the 1.1100 milestone as investors assessed Trump’s announcement of a 90-day pause to reciprocal tariffs for non-retaliatory countries.
That said the US Dollar (USD) gathered steam and motivated the US Dollar Index (DXY) to set aside the initial negative trend and reverse course, hitting the area above the 103.00 hurdle, just to recede afterwards.
Tariffs remain front and centre
In the latest escalation of global trade tensions, President Trump imposed a blanket 10% duty on all U.S. trade partners starting April 5. Additional tariffs ranging between 10% and 50% have begun rolling out for specific countries and regions, with the European Union (EU) facing a 20% rate.
Adding another layer of uncertainty, the White House announced 125% levies on Chinese imports effective April 10, while signalling its intention to pause tariffs already announced to non-retaliatory countries.
EU President Ursula von der Leyen, meanwhile, indicated the bloc’s willingness to negotiate but cautioned that it stands ready to retaliate if necessary. Fears persist that an escalating tariff tit-for-tat could shave up to 0.5% off Eurozone GDP, keeping investors on edge.
Central banks on high alert
On the US side, the Federal Reserve (Fed) left interest rates unchanged, wary of potential inflationary pressures sparked by tariffs and a cooling economy.
Fed Chair Jerome Powell acknowledged the fragile balance, noting that a 50-basis-point rate cut is not off the table if growth decelerates further. His comments on Friday warned that upcoming tariffs might be “significantly larger than expected,” spelling out risks of both slower growth and higher inflation.
Across the pond, the European Central Bank (ECB) lowered its key interest rate by 25 basis points and emphasized it could do more if economic uncertainty persists. Though policymakers foresee a modest dip in growth and stubborn short-term inflation, they still anticipate easing price pressures by 2026.
President Christine Lagarde warned that a full-blown trade conflict with the U.S. could slice 0.5% off Eurozone GDP. While some officials, such as Robert Holzmann, believe additional cuts may not be strictly necessary, they concede that an intensifying trade war could shift the calculus.
Euro sentiment: Brief lull or bullish continuation?
Speculative traders trimmed their net long Euro positions to about 52K contracts—three-week lows—heading into “Liberation Day,” while commercial traders pared their shorts to nearly 83K contracts. Despite these reductions, the overall stance remains marginally positive for the Euro, though ongoing uncertainty might sideline many bulls until a clearer picture emerges.
EUR/USD technical picture
Upside barriers include the 2025 peak at 1.1145 (April 3) as the initial hurdle, with a break there potentially opening the door to the 1.1200 region and the September 2024 high at 1.1213.
On the downside, support emerges at 1.0732 (the March 27 weekly low), which aligns with the 200-day SMA and serves as a critical floor, as a decisive break beneath this level could expose the 55-day SMA at 1.0635.
From a technical perspective, the RSI hovering around 62 points to some bullish momentum, while the ADX near 34 hints at a moderately strong trend.
EUR/USD daily chart
Moving forward
With multiple flashpoints—especially the state of US tariffs on China and the EU—traders will be closely monitoring any shifts or escalations in trade policy. Eastern Europe’s peace talks might offer fleeting relief, but forthcoming communications from both the Fed and ECB are likely to steer EUR/USD in the near term. This week’s US inflation data are set to be the primary catalyst, as markets seek clues on potential monetary policy moves.
