- The EUR/USD outlook indicates increasing worries about Trump’s tariffs.
- Trump threatened to increase tariffs on steel and aluminium goods to 50%.
- Data on Friday revealed softer than expected German inflation, supporting bets for another ECB rate cut.
The EUR/USD outlook indicates increasing worries about Trump’s tariffs that are sending traders from US to Eurozone assets. As a result, the euro is climbing despite expectations of an ECB rate cut later this week.
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The dollar was frail on Monday as tariff threats last week renewed concerns about trade wars. Trump threatened to increase tariffs on steel and aluminium goods to 50%. Such a move would hurt some of the US’s major trading partners, like the Eurozone and Canada. Moreover, it would likely trigger similar responses, leading to trade wars. The news hurt the dollar as it shook investor confidence in the US economy.
However, since last week, the euro has gained on hopes of a trade deal between the US and the Eurozone. The two economies resumed serious talks that might yield some fruits and avoid a trade war.
Meanwhile, data on Friday revealed softer than expected German inflation, supporting bets for another ECB rate cut in June. Inflation in the Eurozone has been on a downtrend and could soon hit the central bank’s 2% target. Moreover, the likelihood of slower growth due to Trump’s tariffs could force the ECB to maintain its dovish stance.
On the other hand, core inflation in the US increased by 0.1% as expected, likely keeping the Fed on a wait-and-see stance.
EUR/USD key events today
- US ISM manufacturing PMI
- Fed Chair Powell Speaks
EUR/USD technical outlook: Bulls eye the 1.1500 key resistance
On the technical side, the EUR/USD price has broken above the 1.1401 key resistance to make a higher high. The move has strengthened the bullish bias. The price now trades well above the 30-SMA, with the RSI nearing the overbought region.
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EUR/USD has maintained a bullish trajectory since it recently reversed. The price has made a series of higher highs and lows, creating a strong support trendline. However, in this time, it has chopped through the 30-SMA, showing the trend has been shallow.
The recent bullish breakout allows bulls to set their sights on the next target at the 1.1500 key resistance. A break above will further strengthen the uptrend.
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Saqib Iqbal
