EUR/USD Resistance Rejection as Trump's 25% Tariff Hits Headlines

EUR/USD Talking Points:

• EUR/USD had pushed back up to test the Fibonacci level at 1.0523 when suddenly another tariff comment hit the headline, this time with President Trump saying that he would levy 25% tariffs on Europe.
• The tariff topic has had impact on both EUR/USD and the USD through February, but it had largely been a month of recovery for both as the timing of tariff implementation appeared to be April 1^st or later. Today’s comment sent a shock in each market and the question remains as to whether this will happen sooner rather than later. Trump’s comment, as reported by the Financial Times, was “We have made a decision and we’ll be announcing it very soon. It’ll be 25 per cent.”

Well, Trump volatility is back, and markets got another reminder of that today. The Euro was enjoying another trip above the 1.0500 handle which has been a more frequent occurrence of late, and then another comment on tariffs from President Trump drove a fast pullback in the EUR/USD pair as USD bounce before a test of its recent low.

To be sure, this isn’t the first tariff-related move in the USD or EUR/USD. As a matter of fact February started with that similar type of shock, as a comment on that weekend was the first time that Trump specifically mentioned tariffs on Europe. At the time, he said that European tariffs were coming ‘pretty soon,’ and that led to a strong sell-off in EUR/USD to start the month.

Notably, however, sellers couldn’t re-test the 1.0200 level, which is a confluent spot of support with two different Fibonacci levels in tight proximity. The next item on that topic was the announcement of reciprocal tariffs, which was largely thought to imply Europe. The initial comment regarding reciprocal tariffs helped EUR/USD to hold resistance at 1.0406; but the actual announcement a week later led to breakout when they were attached with an April 1^st start date.

EUR/USD rallied all the way up to 1.0500 on the back of that announcement, and that’s where it’s stalled for the past week and a half.

EURUSD AD

EUR/USD Daily Price Chart

EUR/USD Shorter-Term

The big question now is whether the tariff announcement can bring along a larger reversal in EUR/USD. At this point, there’s remaining bullish potential from both shorter-term and longer-term charts. From the monthly, EUR/USD is still showing a non-completed morning star formation and that’ll remain of interest into the end of the week. And shorter-term, EUR/USD has continued its pattern of higher-highs and higher-lows, with recent support at the 61.8% retracement of the December-January major move.

While EUR/USD bulls have so far been unable to mount much for continuation beyond 1.0500, there has been an increasing frequency of tests at the psychological level, with that price having come into play for each of the past five trading days.

But – the big question now is whether bulls defend support, and the 1.0457 level would be ideal for that theme, but 1.0406 would also apply as that spot of resistance-turned-support held the lows last week.

EUR/USD Four-Hour Price Chart

--- written by James Stanley, Senior Strategist