EUR/USD struggles to extend its upward movement beyond the psychological resistance level of 1.0500 in Monday’s North American session, with the pair trading mostly sideways as investors weigh the potential impact of US President Donald Trump’s proposed tariffs on the Eurozone.
On Friday, President Trump announced plans to impose tariffs on imported cars, effective around April 2, with reciprocal tariffs also expected. The tariffs are anticipated to primarily affect Germany, Japan, and South Korea, which are major car exporters to the US. In 2023, Germany alone exported $24.3 billion worth of vehicles to the US.
Over the weekend, European Central Bank (ECB) policymaker Fabio Panetta expressed concerns about inflation risks in the Eurozone, noting that the tariffs' effect on inflation would likely be "limited, if not slightly negative."
Panetta also highlighted the possibility of a weaker Euro, though he suggested that a global economic slowdown and Chinese goods entering European markets could offset the impact. His comments reflect a dovish monetary policy outlook, with Panetta warning that the main risk for Europe is inflation falling below the 2% target in the medium term.
The EUR/USD remains under pressure as investors evaluate the implications of the tariff news and Panetta’s dovish stance.
Daily Digest Market Movers: EUR/USD Faces Roadblock as US Dollar Stabilizes
- EUR/USD struggles to extend last week’s gains as the US Dollar (USD) steadies near its two-month low, reached on Friday. The US Dollar Index (DXY), which measures the Greenback’s value against six major currencies, trades around 106.80.
- The USD Index saw a sharp decline on Friday following disappointing US Retail Sales data for January, which showed a faster-than-expected contraction of 0.9%, compared to economists' forecast of a 0.1% drop.
- The bearish outlook for the USD was already in place after President Trump’s plan for reciprocal tariffs appeared to lose momentum. Despite Trump’s call for the Commerce and Treasury Department to prepare a reciprocal tariff plan on Thursday, markets anticipated the announcement would be made immediately.
- Trump’s tweet on Truth Social, signaling a big announcement regarding tariffs, added to the uncertainty and moved the markets.
- This week, the US Dollar’s direction will be shaped by speeches from several Federal Reserve (Fed) officials, as well as Friday’s preliminary S&P Global Purchasing Managers Index (PMI) data for February.
Technical Analysis: EUR/USD Faces Resistance Near 1.0500
EUR/USD struggles to break the significant resistance level of 1.0500 in European trading on Monday. The pair remains in a bullish trend, holding above the 50-day Exponential Moving Average (EMA) around 1.0430.
The 14-day Relative Strength Index (RSI) is nearing 60, and sustained movement above this level could trigger further bullish momentum.
Support is found at the February 10 low of 1.0285, while the December 6 high of 1.0630 remains a critical barrier for the Euro bulls.
