- EUR/USD is being traded cautiously following a decision by the US President to apply a 30% tariff on imports from the EU.
- European Commission President Ursula von der Leyen has warned about potential retaliatory measures to safeguard the interests of the bloc.
- This week’s release of the June Consumer Price Index (CPI) data will be crucial for the direction of the US dollar.
The EUR/USD pair is hovering around 1.1670 during the Asian trading session on Monday. The euro is under pressure, reflecting concerns from traders as the US tariffs on EU imports will take effect on August 1.
In addition to the EU, Mexico has also received notifications from the US regarding a 30% tariff, with hints at further increases depending on how nations respond.
Ursula von der Leyen indicated that her team is still negotiating trade terms with the US, expressing optimism that a deal could be reached before the August 1 deadline. She also noted that proportional measures could be taken by the EU as needed to protect its market interests.
In the US, all eyes are on the upcoming June CPI data set for release on Tuesday. This inflation figure could significantly influence market expectations regarding the Federal Reserve’s monetary policy. Analysts predict inflation rates may have risen more sharply in June.
The EUR/USD pair may find itself adjusting near an upward trendline drawn from a low of 1.0360 on February 25, according to daily chart patterns. Additionally, the 20-day Exponential Moving Average (EMA) shows support around the 1.1660 mark.
Currently, the 14-day relative strength index (RSI) has slipped into the 40.00-60.00 range, indicating a decrease in bullish momentum. Despite this, the bullish outlook remains relatively intact.
Looking ahead, the pair could potentially shift to a bearish trend, possibly testing levels around 1.1454 and a key support level of 1.1400, which was noted on June 23.
Conversely, if the pair moves upward and crosses 1.1830, it might pave the way toward the psychological threshold of 1.1900, followed by resistance at 1.2000.
EUR/USD Daily Chart
Euro FAQ
The euro serves as the currency for 19 countries within the eurozone. It’s the second most traded currency globally, following the US dollar, accounting for 31% of forex trading in 2022 with an average turnover of over $2.2 trillion daily. The EUR/USD pair stands out as the most commonly traded currency pair.
The European Central Bank (ECB), based in Frankfurt, Germany, oversees monetary policy within the eurozone, focusing on maintaining price stability. This involves adjusting interest rates to control inflation or promote growth. The ECB makes decisions during eight annual meetings, with key leaders involved, including its president, Christine Lagarde.
Inflation data for the eurozone is evaluated using the Harmonized Index of Consumer Prices (HICP), crucial for the euro’s health. If inflation exceeds expectations, it may prompt the ECB to raise interest rates to regain control, particularly if it surpasses the 2% target. Typically, higher interest rates can strengthen the euro by attracting global investment.
Various economic indicators, including GDP, employment figures, and consumer sentiment, provide insights into economic health and impact the euro. Strong economic performance can attract investment and may lead the ECB to raise interest rates, strengthening the euro; conversely, weak data may lead to a decline.
Trade balances, which reflect the difference between exports and imports, are also critical. A country with a favorable trade balance tends to see its currency strengthen due to increased foreign demand for its exports, while a negative balance can have the opposite effect.
