EUR/USD Movement Due to Tariff Threats
The EUR/USD exchange rate has increased by over 1% in just two days, currently trading at 1.1730. This change comes as the US dollar faces a general decline, largely fueled by President Trump’s recent threats to impose further tariffs on European nations. These threats have ignited a “sell America” sentiment reminiscent of what occurred after “Emancipation Day” last April.
As Trump begins his second term with plans for a 10% tariff against European countries that resist his Greenland annexation proposal, concerns about economic stability are rising. In response, eurozone leaders are convening in Brussels to strategize a potential counteraction to Trump’s aggressive trade policies amidst an escalating trade conflict among Western allies.
In Germany, producer prices in December indicate ongoing deflation, while attention turns to the upcoming ZEW business confidence index. Following a long weekend due to the Martin Luther King Jr. holiday, US markets have reopened, but the economic agenda appears sparse, featuring only the ADP report on private sector jobs. All eyes are on Trump’s upcoming speech in Davos.
Market Movers Overview
- Trump’s tariff threats on Europe have triggered a new phase of “Sell America.” Investor confidence seems to be shrinking, prompting a sell-off in the dollar and US Treasury yields, leading to a nearly 1% rise in the euro against the dollar over a couple of days.
- Denmark’s Economy Minister, Stefanie Roth, expressed her commitment to engaging in dialogue with the US but warned that rising tensions might force a European response.
- Germany’s producer price index decreased by 0.2% in December, surpassing anticipated levels of -0.1% and reflecting a year-over-year decline of 2.5%, down from 2.3% in November.
- The ZEW survey, expected to be released later, suggests a positive shift in investor sentiment towards Germany’s economy, potentially rising to 50 in January, a notable increase from December’s 45.8 and November’s 38.5.
- The Eurozone Harmonized Consumer Price Index (HICP) for December was adjusted down to a year-on-year growth of 1.9%, although core HICP growth remained at 2.3%.
Technical Analysis: EUR/USD Outlook
The EUR/USD pair seems to be on an upward trajectory, currently above 1.1730. The 4-hour Relative Strength Index (RSI) is indicating an overbought condition, while the Moving Average Convergence Divergence (MACD) continues to trend upwards, widening its histogram.
Potential resistance may be found at the January 6th high of around 1.1740, followed by the January 2nd high of 1.1765. Further resistance beyond that could target the highs just above 1.1800 from mid-December. On the flip side, if there’s a bearish reversal, support could be at the 1.1660 region, closely followed by the 1.1635 intraday level.
