FUNDAMENTAL OVERVIEW
USD:
The US Dollar weakened across the board on Friday after the US Supreme Court struck down Trump’s reciprocal tariffs. The policy uncertainty is what is likely to have weighed on the greenback because on net, not much has changed.
Trump has already imposed new tariffs under a different law and USTR Greer has stated that the tariff deals remain in place and they will be honoured. Moreover, the new levies actually reduce the effective average tariff rate, so it could be a positive.
The dollar might stay on the backfoot for now amid the uncertainty, but I don’t think the big picture has changed much. The real risks remain a potential US-Iran military escalation which could boost the greenback on severe risk-off mood or a hawkish repricing on stronger US data which would have a positive effect on the USD.
EUR:
On the EUR side, nothing has changed. As a reminder, the ECB held interest rates steady as widely expected at the last meeting and kept the same data-dependent and meeting-by-meeting guidance. The policymakers have eased the rhetoric on the euro recently after the currency dropped below the 1.20 level against the dollar.
The focus remains on inflation as the central bank has repeatedly stated that it won’t respond to small or short-term deviations from the 2% target. The data for now has been positive with economic activity picking up and core inflation hovering just a bit above target.
EURUSD TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that EURUSD fell into a new monthly low last week but eventually bounced back following the US Supreme Court decision. There’s not much we can glean from this timeframe, so we need to zoom in to see some more details.
EURUSD TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see the price broke above the downward trendline that was defining the bearish momentum. The price is now retesting the broken trendline where we have also a support zone around the 1.1805 level. This is where we can expect the buyers to step in with a defined risk below the support to position for a rally into the 1.1927 level. The sellers, on the other hand, will look for a break lower to pile in for a drop into the 1.17 handle next.
EURUSD TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s not much else we can add here as the buyers will look for a bounce around the support, while the sellers will look for a break lower. The red line define the average daily range for today.
UPCOMING CATALYSTS
Tomorrow we have the weekly US ADP jobs data. On Thursday, we get the latest US Jobless Claims figures. On Friday, we conclude the week with the German CPI and the US PPI data. Also, keep watching out for US-Iran headlines.
