Peter Smith
EUR/USD got slammed today, dropping over 100 pips after the US and EU announced their trade deal. The pair hit 1.1771 during Asian trading but quickly reversed course once European markets digested the news, now sitting at 1.1658.
The dollar initially opened weak as traders chased risk assets, but that changed fast when the trade deal details came out. Now the greenback is rallying across the board.
EUR/USD Hit by 15% Tariff News
The deal sets a 15% tariff on most European goods entering the US – way up from the current 4.8% average. Some sectors get exemptions like aircraft parts, chemicals, semiconductor equipment, and certain agricultural products, but 15% is still a big jump.
European reactions are mixed. ECB's Peter Kazimir said Monday the deal "reduces uncertainty" but admitted it's unclear how it affects inflation. French PM François Bayrou wasn't so diplomatic, calling it a "dark day" for the EU and saying Europe "capitulated to Donald Trump's threats."
Meanwhile, US-China trade talks are resuming in Stockholm, keeping trade tensions in focus.
EUR/USD Technical Outlook Bearish
Technically, EUR/USD is in trouble. The daily chart shows the pair broke below its 20 SMA, which provided support last week. That level around 1.1705 is now resistance. The 100 SMA stays bullish but sits over 300 pips below current prices. Technical indicators are heading lower around midlines.
The 4-hour chart shows EUR/USD bounced from oversold conditions but remains below the 20 and 100 SMAs while struggling with the 200 SMA. Indicators still point down near oversold territory.
Support: 1.1640, 1.1600, 1.1555 Resistance: 1.1695, 1.1740, 1.1785
Big Week Ahead for EUR/USD
This week is packed with market movers. Wednesday brings the Fed decision, plus US jobs data ahead of Friday's Nonfarm Payrolls. We're also getting Q2 GDP estimates for both the US and EU, along with inflation updates.
The trade deal has the dollar in control for now, but all this economic data could flip things quickly. EUR/USD looks vulnerable to more selling based on the technical picture, so watch those support levels closely.
Peter Smith
