EUR/USD Holds Steady After Trump Threatens 30% Tariff on the Eurozone | Errante
Market Overview
The EUR/USD pair held steady on Monday despite the likelihood of higher tariffs on the Eurozone. However, on a larger scale, the price remains in a bearish trend as Trump’s tariff threats rekindle trade tensions.
Fundamental Analysis
The euro held steady on Monday after dropping to new lows over the weekend. The drop followed an announcement by Trump that he had sent a letter to the Eurozone, notifying the bloc of a 30% reciprocal tariff. However, the market reaction was muted. Trump’s tariff threats have lost the impact they had initially on markets. It has become clear that the US president is more willing to negotiate better trading deals. He has pushed back the deadline for these tariffs to August 1, meaning countries still have time to negotiate.
Nevertheless, these threats have renewed worries about trade wars. So far, Trump has announced higher tariffs on major economies like Mexico, Japan, South Korea, Brazil and Canada. If these tariffs take effect, there will be consequences. Already, countries like Brazil have vowed to retaliate. Trade wars would darken the outlook for the global economy. Meanwhile, tariffs on the Eurozone would hurt the local economy. At the same time, it would add pressure on the ECB to lower interest rates further, hurting the euro.
Meanwhile, the dollar has gained with these threats as Treasury yields soared. Higher tariffs could boost inflation, forcing the Fed to remain cautious. However, in the long run, a slowdown in the economy will hurt the US currency. This week, market participants will watch the US CPI report for clues on future Fed moves. Economists believe price pressure accelerated to 2.6% annually and 0.3% monthly. Hotter-than-expected numbers would delay rate cuts, boosting the dollar and weighing on EUR/USD.
Technical Analysis
After reaching a high of 1.1830 on July 1st, EURUSD has experienced a notable decline of approximately 1.50%, dropping to 1.16532 on the H4 chart. A confirmed bearish order block formed at the recent top, which has contributed significantly to the ongoing bearish momentum. The monthly candle also supports this bearish outlook. A decisive break and close below the 1.1660 level, which represents a key structural support on the H4 timeframe, could signal further downside potential. On the other hand, a potential bullish scenario could emerge if the price breaks above the unconfirmed bullish order block near 1.1699. In this case, the next resistance would likely be the trend line, and a sustained move above it, accompanied by high volume and followed by a low volume retest, would be necessary to confirm a bullish reversal.
