Title: EUR/USD Weekly Analysis: Caught Between Fed Expectations and Tariff Uncertainties
Original article by Yohay Elam, FXStreet
The euro-dollar (EUR/USD) currency pair ended the previous week with modest losses, as trade disputes and shifting expectations over U.S. Federal Reserve policy drove investor sentiment. While the pair made several attempts toward the 1.10 level, it failed to hold above it. Economic data releases from both the eurozone and the U.S. provided mixed signals, while trade tensions between the United States and the European Union added another layer of volatility.
Heading into the new week, forex traders are paying close attention to developments in trade policy, central bank communications, and upcoming economic indicators. All eyes will also be on any hints about future Federal Reserve rate moves, as speculation continues to mount ahead of coming monetary policy decisions.
Overview: EUR/USD Under Pressure
In the past week, the euro suffered modest declines against the dollar. Despite some signs of stabilization in eurozone economic indicators, the strength of the U.S. dollar prevailed. The dollar continued to attract safe-haven flows amid rising tensions over trade tariffs. In addition, increasing expectations of a hawkish turn by the Fed supported the greenback.
– EUR/USD opened the prior week trading near 1.1050 but slid to around 1.0950 by Friday’s close.
– Trade tensions, particularly concerning potential new tariffs on European goods, weighed on market confidence.
– Fed speakers hinted at a cautious stance but offered no firm commitment to further rate cuts, leaving markets guessing.
– Eurozone figures showed some weaknesses but were partially offset by signs of recovery in business sentiment.
Key Drivers from the Past Week
Several factors moved the EUR/USD pair during the previous trading week. These included central bank signals, trade disputes, and economic data from both regions.
Federal Reserve Messaging
– Fed officials delivered mixed messages during the week.
– Chair Jerome Powell reiterated that the Fed is monitoring economic conditions and remains data-dependent.
– Some policymakers suggested caution about further rate cuts unless significant deterioration occurs in economic indicators.
– Fed minutes showed division among policymakers, with some advocating for patience while others remain open to easing.
U.S. Economic Data
– Retail Sales recorded a better-than-expected monthly rise, reinforcing the view of a resilient consumer base.
– Industrial Production came in softer than forecast, showing that the manufacturing sector continues to deal with trade-related headwinds.
– Inflation figures met expectations, offering no surprises but failing to significantly change the Fed outlook.
Eurozone Economic Releases
– Germany’s ZEW Economic Sentiment Index came in above expectations, providing support for the euro early in the week.
– However, the eurozone Purchasing Managers’ Index (PMI) numbers were underwhelming, pointing to continued softness in the manufacturing sector.
– Inflation remained subdued, with Core CPI well below the ECB’s target, creating downward pressure on the euro.
Trade and Tariff Tensions
Escalating trade conflict between the U.S. and Europe reemerged as a primary concern for investors.
– The WTO ruled in favor of the U.S. in a long-standing Airbus subsidy case, allowing it to impose tariffs on EU goods amounting to billions of dollars.
– Markets fear European retaliation, which could escalate into a tit-for-tat scenario, further damaging investor confidence.
– With the U.S.-China trade tensions already souring global sentiment, renewed disputes with the eurozone could worsen the outlook for global growth.
Technical Outlook: EUR/USD Still Under Bearish Pressure
Although the euro failed to break lower decisively, the pair remains in a broader downtrend. A failure to reclaim the 1.10 handle reflects limited bullish momentum for now.
Support and Resistance Levels:
– Support lies at 1.0925, followed by 1.0870 and the 2019 low near 1.0830.
– Resistance is capped at 1.1060, with further levels at
Read more on EUR/USD trading.