Trump Announces Reciprocal Tariffs, USD Tests Support

Trump Tariff, US Dollar Talking Points:

• President Trump has announced reciprocal tariffs, saying “whatever they charge us we will charge them.” He also said that the US will consider countries using a VAT tax as a tariff for reciprocal tariffs, which would apply to Europe. And Trump has also said that a tariff on automobiles are coming soon, which will be stacked on top of reciprocal tariffs.
• Earlier in the day, the Dollar was dashed on media reports that tariffs wouldn’t be implemented until April 1^st, but famously Trump has walked back similar reports multiple times. So, caution is still warranted into the end of the week.
• The fact that the Dollar didn’t rally more on the reciprocal tariff announcement implies that markets are expecting President Trump to use this as a negotiation chip rather than wanting to implement tariffs anytime soon. But he’s shown a penchant for Friday announcements that can lead to weekend anxiety and gaps-down the following week, on top of weekend commentary on the topic such as when he first mentioned the idea of tariffs on Europe.

DXY is back to 107.35 and so far, that’s held the daily low for today. The backdrop around tariffs remains opaque, as I looked at in the above video, and this will likely remain as a driving factor in FX markets, which could have related implications elsewhere like commodities and equities.

From the weekly chart of DXY, we can see how important that level has been, holding support for now the fourth consecutive week in DXY. Notably, Trump has had quite a bit to say on Fridays of late and given today’s announcement around reciprocal tariffs, that potential remains. If he does highlight a possibly earlier start date, particularly for Europe, there could be a USD-strength impact to appear.

U.S. Dollar Weekly Price Chart

Chart prepared by James Stanley; data derived from Tradingview

USD Shorter-Term

To say that this is a volatile situation would appear an understatement. As I discussed in this week’s webinar the dominance of headlines and the tariff topic have seemed to eclipse strong U.S. inflation data, to the point that the U.S. Dollar has shown weakness even with markets pricing out rate cuts for later this year.

It’s been a busy couple of days, and I’ve recapped some of the larger events on the below 30-minute chart of DXY.

U.S. Dollar 30-Minute Chart

EUR/USD

When I looked at the Euro yesterday I highlighted the shorter-term bullish bias in the pair as there’s been a penchant for sellers to dry up below the 1.0300 handle. So far this week it’s been another failed run from bears and the pair is now testing a fresh two-week-high.

As I looked at in the webinar, chasing could be a challenge here – but pullbacks and responses to higher-low support could be an opening for USD-weakness setups. The next level overhead is the 1.0457 Fibonacci level, and for support, the prior resistance at the confluent 1.0407 zone looms large. For next resistance, above the 1.0500 handle is the 1.0533 Fibonacci level that set the January high.

EUR/USD Daily Price Chart

--- written by James Stanley, Senior Strategist