- Canada and Mexico were able to negotiate better trading agreements with the US.
- The dollar collapsed after Trump paused tariffs on Canada and Mexico.
- The US implemented tariffs on China, leading to an immediate response.
The EUR/USD forecast indicates solid bullish sentiment amid relief over the pause in Trump’s tariffs on Tuesday. Market participants are more convinced that these tariffs are more of a negotiating tactic. Therefore, the risk of a weaker Eurozone economy has dropped.
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The euro rose on Wednesday despite threats that the Eurozone would be the next victim of Trump’s tariffs. Traders are less worried about the impact of these tariffs since the US seems more willing to negotiate better trading deals than to punish its trade partners.
Notably, on Tuesday, Canada and Mexico were able to negotiate better trading agreements, leading to a pause in tariffs. As a result, the dollar collapsed while its peers, including the euro, rebounded.
Initially, there were concerns that Trump’s tariffs would weaken major economies like the Eurozone by reducing demand for its goods. Such an outcome would push central banks to aggressively lower borrowing costs in order to support their economies. This, in turn, would weaken their currencies against the dollar.
However, since the tariff pause on Tuesday, most major currencies have rebounded. Nevertheless, tariffs on China were implemented, leading to an immediate response. Therefore, there is still a risk of a trade war between the two countries.
EUR/USD key events today
- US ADP non-farm employment change
- US ISM services PMI
EUR/USD technical forecast: Bulls on the brink of breaking 1.0400
On the technical side, the EUR/USD price has broken above the 30-SMA resistance, indicating a bullish shift in sentiment. At the same time, the RSI has broken above 50, signaling a surge in bullish momentum.
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However, bulls face a solid hurdle at the 1.0400 resistance level. If the price breaks above, it will likely reach the 1.0500 resistance level. On the other hand, if the level holds firm, the price might drop back below the SMA to revisit the 1.0225 support.
Initially, bears had shown solid momentum, causing a big gap to the 1.0225 level. However, since then, the price has filled the gap and reversed the downtrend. However, bulls must make new highs above the 1.0500 level to confirm a continuation of the previous bullish trend. Otherwise, bears might resume the downtrend.
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