EUR/USD holds onto gains as Trump assaults Fed’s autonomy

• EUR/USD sticks to gains near 1.1500 as the US Dollar has been battered by Trump’s attack on the Fed’s independence.

• Trump blames Fed Powell for the potential US economic slowdown.

• The ECB is expected to cut interest rates in June due to escalating downside risks to Eurozone inflation.

EUR/USD trades firmly around 1.1500 during European trading hours on Tuesday. The major currency pair is taking a sigh of relief after a strong rally in the last few weeks. The pair seems to be gearing up for a fresh upward move as the US Dollar (USD) is expected to continue facing the burden of growing tensions between the Federal Reserve (Fed) and United States (US) President Donald Trump over the monetary policy.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, aims to find a cushion after refreshing a three-year low near 98.00.

US President Trump continues to criticize Fed Chair Jerome Powell for not lowering interest rates and warned that the economy could face a downturn if they are not reduced immediately. 

"With these costs trending so nicely downward, just what I predicted they would do, there can almost be no inflation, but there can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW," Trump wrote in a post on TruthSocial on Monday.

Meanwhile, Jerome Powell has been supporting keeping interest rates in the current range of 4.25%-4.50% until it becomes clear whether inflation led by new economic policies is persistent or short-lived. 

US President Trump has also threatened to remove Powell over a year before the completion of his term for not lowering interest rates. It is still debatable whether Donald Trump can sack Powell, but the situation will remain the same as the decision on borrowing rates will be eventually taken by other Fed members, and none of them has spoken out about easing the monetary policy immediately.

The signs of political interference in the operations of the Fed, which is an autonomous institution, have led to a steep decline in the safe-haven status of the US Dollar. Investors doubt the credibility of the US Dollar and US assets under the threat of Trump’s attack on the Fed’s independence.

Daily digest market movers: EUR/USD remains firm at US Dollar’s expense

• EUR/USD clings to gains near 1.1500 at the expense of the US Dollar, whose safe-haven status has been questioned due to events of ever-changing tariff headlines by Donald Trump and his feud with Fed Powell. Trump announced a 90-day pause in executing reciprocal tariffs after getting responses from his trading partners to make a fair deal. However, the intact trade war between the US and China has kept the US Dollar on the backfoot.

• The impact of the intensified trade war between the world’s two largest powerhouses has battered the global economic outlook, including the US, given that American importers will bear the burden of higher tariffs, which they will pass on to consumers. Such a scenario will diminish households’ purchasing power significantly.

• During European trading hours, the Euro (EUR) trades cautiously as traders have become increasingly confident that the European Central Bank (ECB) could cut interest rates again in the June policy meeting. ECB dovish bets have swelled on increasing downside risks to Eurozone inflation amid fears of global economic turmoil.

• Analysts at Citi anticipated price growth of 1.6% next year and 1.8% in 2027 last week before the ECB’s interest rate decision on Thursday. These predictions came before the ECB’s monetary policy announcement, in which the central bank reduced its key borrowing rates for the seventh time in the current monetary easing cycle and guided a grim economic outlook.

• In the press conference, ECB President Christine Lagarde warned that downside risks for the Eurozone economy have increased. Lagarde said that the economic outlook is "clouded by uncertainty" as trade disruptions would weigh on "business investment."

• Going forward, the next trigger for the Euro will be the preliminary Purchasing Managers’ Index (PMI) data of the Eurozone and its nations for April, which will be released on Wednesday.

Technical Analysis: EUR/USD trades firmly near 1.1500

EUR/USD grips gains near 1.1500 in Tuesday’s European session. The major currency pair strengthened after a breakout above the April 11 high of 1.1474. Advancing 20-week Exponential Moving Average (EMA) near 1.0850 suggests a strong upside trend.

The 14-week Relative Strength Index (RSI) climbs to overbought levels around 75.00, which indicates a strong bullish momentum, but chances of some correction cannot be ruled out.

Looking up, the round-level figure of 1.1600 will be the major resistance for the pair. Conversely, the July 2023 high of 1.1276 will be a key support for the Euro bulls.