- The EUR/USD abruptly bounces about 1,0350 while the US president, Trump, postpone his tariff orders on Canada and Mexico for 30 days.
- Trump’s intentions to impose tariffs on China remain intact.
- The ECB is expected to cut interest rates three more times this year.
The EUR/USD bounces from the minimum intradication of 1,0270 and is recovered about 1,0350 in the European session on Tuesday. The main currency pair finds a demand for buyers since the decision of the president of the United States (USA), Donald Trump, to postpone tariffs on Canada and Mexico has decreased the attractiveness of a safe refuge of the US dollar (USD).
The US dollar index (DXY), which tracks the value of the USD compared to six main currencies, loses its intradic and quotes earnings at 108.44 at the time of writing, on the way to the way to the minimum of Monday of 108.40.
The president of the USA, Trump, suspended the imposition of tariffs on his American partners after they agreed to cooperate to stop the fentanyl flow. On the other hand, the president’s proposal to impose 10% tariffs on China continues on the table, and also has proposed to go further. “China, luckily, will stop sending us fentanil, and if they don’t, tariffs will rise substantially,” Trump said.
Meanwhile, China has quickly responded to Trump tariffs with greater 15% levies on liquefied coal and natural gas (LNG), and 10% for crude oil, agricultural equipment and some cars.
Such scenario indicates that the commercial war will not be globalized and will remain mostly between the US and China, which has affected the demand for safe refuge assets.
In the Economic Front, the US dollar will be guided by a series of economic indicators related to the labor market this week, such as Jolts employment offers, the change of employment ADP and non -agricultural payroll data (NFP), and figures of the US ISM Services PMI.
Labor market data will influence market speculation on the perspectives of the Federal Reserve Monetary Policy (FED) for the whole year. Currently, the Fed is waiting for interest rates until you see some “real progress in inflation or at least some weakness in the labor market.”
Daily market movements: EUR/USD is recovered at the expense of the US dollar
- The recovery movement in the EUR/USD comes from some weakness in the US dollar, while the prospects for the euro (EUR) continue to be uncertain since investors hope that the eurozone will be the next one to face lethal tariff threats by of the president of the USA, Trump. During the weekend, Trump said he will definitely impose tariffs on the eurozone after accusing the old continent of not buying enough US cars and agricultural products. He added that the EU takes “almost nothing and we take everything from them.”
- In response to Trump’s tariff threats, French president Emmanuel Macron said the European Union (EU) would respond if his interests were attacked. “If our commercial interests are attacked, Europe, as a true power, will have to be respected and, therefore, react,” Macron said, The Guardian reported.
- Market experts believe that trade and investment between the old continent and the US are of the largest worldwide, and a commercial war between them would accelerate inflation and lead to an economic disruption. Greater inflation in the Eurozone would also create problems for the European Central Bank (ECB), which is on the path of expansion of monetary policy with the confidence that price pressures will return sustainably to the target of the Central Bank of the 2 % this year.
- The ECB reduced its deposit rate at 25 basic points (PBS) to 2.75% and guided the path of monetary policy is clear. Operators are confident that the ECB will make three more rates cuts for the summer.
Technical analysis: EUR/USD bounces from 1,0210
The EUR/USD is recovered from its minimum of three weeks of 1,0210 to quote about 1,0350 on Tuesday, but still quotes below the exponential mobile socks (EMAS) of 20 and 50 days around 1,0379 and 1,0439, respectively, which, which It suggests a bearish trend.
The 14 -day relative force (RSI) index remains above 40.00. A bearish impulse could be triggered if the RSI breaks below that level.
Looking down, the minimum of January 13, 1,0177 and the round level support of 1,0100 will act as important support areas for the torque. On the contrary, the psychological resistance of 1,0500 will be the key barrier to the euros of the euro.
Euro Faqs
The euro is the currency of the 19 countries of the European Union that belong to the Eurozone. It is the second most negotiated currency in the world, behind the US dollar. In 2022, it represented 31 % of all foreign exchange transactions, with an average daily business volume of more than 2.2 billion dollars a day. The EUR/USD is the most negotiated currency pair in the world, with an estimate of 30 %of all transactions, followed by the EUR/JPY (4 %), the EUR/GBP (3 %) and the EUR/AUD (2 %).
The European Central Bank (ECB), based in Frankfurt (Germany), is the Eurozone reserve bank. The ECB establishes interest rates and manages monetary policy. The main mandate of the ECB is to maintain price stability, which means controlling inflation or stimulating growth. Its main tool is the rise or decrease in interest rates. Relatively high interest rates (or the expectation of higher types) usually benefit the euro and vice versa. The GOVERNMENT BOOK of the ECB makes decisions about monetary policy in meetings that are held eight times a year. The decisions are made by the directors of the National Banks of the Eurozone and six permanent members, including the president of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the harmonized consumer prices index (IPCA), are an important economic indicator for the euro. If inflation increases more than expected, especially if it exceeds 2% of the ECB, it forces the ECB to rise interest rates to control it again. Relatively high interest rates compared to their counterparts usually benefit the euro, since they make the region more attractive as a place for global investors to deposit their money.
Published data measure the health of the economy and can have an impact on the euro. Indicators such as GDP, manufacturing and services PMIs, employment and consumer trust surveys can influence the direction of the single currency. A strong economy is good for the euro. Not only attracts more foreign investment, but it can encourage the ECB to raise interest rates, which will directly strengthen the euro. Otherwise, if economic data is weak, the euro is likely to fall. The economic data of the four largest economies in the euro zone (Germany, France, Italy and Spain) are especially significant, since they represent 75% of the economy of the euro area.
Another important fact that is published on the euro is the commercial balance. This indicator measures the difference between what a country earns with its exports and what you spend on imports during a given period. If a country produces highly demanded export products, its currency will gain value simply by the additional demand created by foreign buyers seeking to buy those goods. Therefore, a positive net trade balance strengthens a currency and vice versa in the case of a negative balance
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
