**EUR/USD Falls Below 1.1700 as Trade Tensions Drive the Dollar to Two-Week High**
*Original article by FXStreet News, expanded and updated with additional market context.*
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### Overview
The EUR/USD currency pair continued its downward trend, dropping below the psychologically significant 1.1700 level, as renewed concerns over global trade tensions fueled demand for the US dollar. Investors flocked to the greenback amid increasing anxiety over the potential escalation of tariffs between the United States and its major trading partners. This shift in market sentiment contributed to the US dollar reaching its highest level in two weeks, exerting further pressure on the euro.
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### Key Developments Impacting the FX Market
#### 1. US Dollar Strength Amid Trade Tensions
– The prospect of additional US tariffs, especially targeting Chinese imports and European goods, triggered a risk-averse atmosphere in global markets.
– Safe-haven flows benefitted the US dollar, pushing the DXY (US Dollar Index) higher as investors sought protection from potential economic fallout.
– Rising yields on US Treasury bonds, particularly the benchmark 10-year note, reinforced the dollar’s appeal compared to other major currencies.
#### 2. EUR/USD Technical Breakdown
– EUR/USD breached the 1.1700 level, a key technical and psychological support for the pair. This move opened the door for further declines, with the next support zones located at 1.1650 and 1.1610.
– Technical indicators, such as moving averages and momentum oscillators, signaled a bearish short-term outlook for the pair.
#### 3. Risk-Off Sentiment in Global Markets
– Global financial markets experienced heightened volatility as investors reacted to headlines signaling the US’s intention to expand tariffs on a wider range of goods.
– Stock indices, including the S&P 500 and European equities, fell in tandem with commodity currencies, further demonstrating risk aversion.
#### 4. Eurozone Economic Challenges
– The euro’s vulnerability was exacerbated by ongoing concerns over the Eurozone’s economic recovery. Recent data pointed to subdued inflation and lackluster growth across major Eurozone economies such as Germany and France.
– Signals from the European Central Bank (ECB) indicated continued dovishness, with policymakers hinting that monetary policy normalization might be delayed further in the face of external headwinds.
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### Detailed Analysis
#### US Dollar Leads as Safe-Haven Asset
As trade disputes intensified, the US dollar solidified its status as the ultimate safe-haven currency. The Trump administration’s aggressive stance on tariffs, already evident in earlier rounds involving China, Mexico, and Canada, now threatened to extend to automotive and technology sectors—key components of European and Chinese exports.
**Factors Supporting the Dollar’s Rise:**
– **Investor flight to safety:** Increased uncertainty drove capital into dollar-denominated assets.
– **Higher US yields:** With the Federal Reserve maintaining its path of gradual rate hikes, US bonds became even more attractive to international
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