The EUR/USD pair trades sideways around 1.1350 in Tuesday’s European session, consolidating recent gains after a strong rally. The US Dollar (USD) finds brief support following more than a week of steady declines, with the US Dollar Index (DXY) stabilizing near a three-year low of 99.00 reached last Friday.
However, investor sentiment remains bearish on the Greenback as it loses its safe-haven appeal due to persistent uncertainty around US trade policies. President Donald Trump’s shifting tariff announcements—first a 90-day pause on reciprocal tariffs for all partners except China, and now plans to temporarily suspend automobile levies—have added volatility to the market.
Trump’s proposal aims to give domestic automakers more time to realign supply chains and build manufacturing capacity in the US. But these measures have also intensified fears of an economic slowdown, pressuring the USD further and boosting US Treasury yields. The 10-year yield has surged over 13% in just six trading days, reflecting rising risk premiums amid economic uncertainty.
Federal Reserve (Fed) Governor Christopher Waller reinforced recession concerns on Monday, calling Trump’s new tariff policy one of the most significant economic shocks in decades. Waller downplayed inflation fears, expressing support for rate cuts if recession risks outweigh short-term price pressures.
EUR/USD Investors Eye ECB Decision and Eurozone Outlook
- The Euro also trades with caution as investors await Thursday’s European Central Bank (ECB) monetary policy announcement. The ECB is widely expected to cut the Deposit Facility Rate by 25 basis points to 2.25%—its sixth consecutive rate cut.
- Market participants are focused on ECB President Christine Lagarde’s press conference for clues about the policy direction through the rest of 2025 and how escalating US-China trade tensions could impact the Eurozone.
- Many ECB officials believe inflation driven by Trump’s tariffs will be short-lived and offset by increased Chinese exports to Europe. As trade tensions escalate between the US and China, Beijing may redirect goods to the Eurozone, potentially affecting the regional economy.
- Despite some optimism over US-EU trade talks—highlighted by US National Economic Council Director Kevin Hassett’s comments about "enormous progress"—recent Eurozone economic sentiment data remains weak. The ZEW Economic Sentiment Survey for the Eurozone dropped sharply to -18.5 in April, well below the 14.2 forecast and previous 39.8 reading. Germany’s ZEW sentiment also plunged to -14 from 51.6, missing the 9.3 estimate. Rising global trade concerns continue to weigh on institutional investor confidence.
- Analysts at Barclays now predict the Eurozone may fall into recession during the second half of 2025, even with the temporary 90-day US tariff pause. Further pressure comes from the US announcement of 20% reciprocal tariffs on EU imports.
Technical Outlook: EUR/USD Holds Bullish Bias Above 1.1350
From a technical perspective, EUR/USD continues to exhibit a strong bullish trend. The price remains above all major short-to-long Exponential Moving Averages (EMAs), signaling upward momentum.
The 14-day Relative Strength Index (RSI) has climbed above 70, reinforcing strong buying pressure. On the upside, the next key resistance lies at the psychological level of 1.1500. Meanwhile, the April 11 low of 1.1192 acts as the nearest support for bulls in case of a pullback.
