EUR/USD ticks up, yet US tariff uncertainty limits gains
- The Euro ticks up, but investors remain cautious as the tariff deadline on August 1 approaches.
- Trump escalated tensions with the EU, lifting the tariff baseline to 15%-20%.
- Technically, the EUR/USD remains within the bearish channel, with key resistance at 1.1655-1.1665.
The EUR/USD pair is showing a minor appreciation, with markets remaining cautious in the early European session on Monday. The Euro (EUR) opens the week with a mild positive tone, yet with upside attempts limited so far, as investors shift their focus to trade tariffs as the August 1 deadline approaches with no significant progress on sight.
The Euro trades around 1.1630 at the time of writing, practically unchanged from the Asian session opening and halfway through last week's trading range. The broader Euro-Dollar (USD) trend remains bearish after a two-week decline, with price action still moving within a descending channel.
In the absence of relevant macroeconomic releases on Monday, investors' focus remains on trade tariffs. Negotiations between Washington and the European Union (EU) have been underway for several weeks already, with no news to report so far. The US Commerce Secretary, Howard Lutnick, affirmed on Sunday that he is confident of reaching a deal. However, US President Trump warned that the August 1 deadline is firm, and the EU is already preparing retaliatory measures in case the talks end without an agreement.
The highlight of the week will be the European Central Bank's (ECB) monetary policy decision due on Thursday. The bank will most likely leave interest rates unchanged, but President Lagarde's comments on the economic outlook and the potential impact of tariffs will determine the Euro's near-term direction.
In the US, investors will keep an eye on corporate earnings. Tech megacaps Alphabet (GOOG) and Tesla (TSLA) will release their respective reports later this week, together with other firms like Lockheed Martin (LMT) and General Dynamics (GD), which might show increasing revenues boosted by higher defence spending.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.03% | -0.06% | 0.09% | 0.00% | 0.04% | 0.22% | -0.05% | |
| EUR | 0.03% | 0.04% | 0.12% | 0.00% | 0.03% | 0.06% | -0.06% | |
| GBP | 0.06% | -0.04% | -0.12% | 0.02% | 0.02% | 0.24% | 0.10% | |
| JPY | -0.09% | -0.12% | 0.12% | -0.08% | -0.02% | 0.07% | 0.03% | |
| CAD | -0.00% | -0.00% | -0.02% | 0.08% | 0.10% | 0.22% | -0.10% | |
| AUD | -0.04% | -0.03% | -0.02% | 0.02% | -0.10% | 0.11% | 0.04% | |
| NZD | -0.22% | -0.06% | -0.24% | -0.07% | -0.22% | -0.11% | -0.14% | |
| CHF | 0.05% | 0.06% | -0.10% | -0.03% | 0.10% | -0.04% | 0.14% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Daily digest market movers: Tariff concerns likely to weigh on the Euro
- Euro rallies are likely to remain limited this week, unless the EU negotiators announce a trade deal with the US. President Trump escalated tensions with the bloc, pushing for a minimum 15% to 20% tariff baseline, while the European Union (EU) is studying answering with tariffs higher than 10% on US products, even if a deal is struck.
- On the other hand, investors remain concerned that the impact of tariffs on the US economy might be akin to that of the Smoot-Hawley Act of 1930, which led to the Great Depression. The US Dollar has been trading higher over the last weeks, but it might start losing ground as the August 1 deadline approaches.
- The Wall Street Journal reported earlier on Monday that the US Treasury Secretary, Scott Bessent, urged President Trump to avoid ousting the chairman of the Federal Reserve (Fed), Jerome Powell, as it would create unnecessary turmoil and damage the economy.
- On Friday, the US Michigan Consumer Sentiment Index improved to 61.8 from 60.7 in the previous month, and slightly above the 61.5 forecasted by the analysts. These figures come in line with the strong employment and consumption data seen previously on the week, which contributed to supporting the US Dollar's recovery last week. Consumers' inflation expectations, also measured by the Michigan survey, declined significantly.
EUR/USD eyes an important resistance area at 1.1665
EUR/USD is consolidating Friday's gains on Monday, but maintains the broader bearish trend intact so far. Price action remains contained within an expanding wedge since July 1, a pattern that highlights an emotional market, often seen after significant tops.
Technical indicators are mixed. The 4-hour MACD shows an incipient bullish momentum, but the 4-hour Relative Strength Index (RSI) is flat around the 50 line.
The pair should break above the previous support level at 1.1655 (July 14 low) and the channel's top at 1.1665 to ease bearish pressure. Next, the July 14 and 15 highs right below 1.1700 come into sight.
On the downside, immediate support is at the 1.1615 intra-day low, ahead of the July 17 low at 1.1555 and the 78.6% Fibonacci retracement of the late June bullish run at 1.1535.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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