EUR/USD Current price: 1.1601
- Mounting trade and geopolitical tensions put the US Dollar under strong selling pressure.
- Tepid American data added to concerns about the US economic performance.
- EUR/USD is extremely overbought in the near term, but has room to extend its advance.
An unstoppable US Dollar (USD) sell-off keeps pushing the EUR/USD pair north on Thursday, currently trading above the 1.1600 mark for the first time since November 2021. Speculative interest drops the Greenback on the back of United States (US) trade war headlines and fresh tensions in the Middle East. Tepid American data added to the broad USD weakness early in the session.
Easing US-China trade tensions weighed on the USD and sent stocks initially higher on Wednesday, but the lack of substantial progress in negotiations quickly dented the mood. The dismal sentiment extended during Asian trading hours, following mixed comments from US President Donald Trump. On the one hand, he said that he was willing to extend the July 8 deadline for completing trade talks, but also added that he is ready to impose unilateral tariffs within two weeks, on multiple trading counterparts.
Meanwhile, news headlines indicate that Israel is preparing an operation against Iran, with the US expecting retaliatory measures. The headline came after US-Iran nuclear talks appeared to have halted, and the US government recommended that American citizens abandon the area.
Finally, the US reported that Initial Jobless Claims rose by 248K in the week ended June 7, higher than the 240K anticipated. The country also published the May Producer Price Index (PPI), which rose 2.6% on a yearly basis as expected.
EUR/USD short-term technical outlook
The EUR/USD pair peaked at 1.1631 and is currently shedding some ground, yet still holding around the 1.1600 mark. The daily chart shows the pair is well above all its moving averages, with the 20 and 100 Simple Moving Averages (SMAs) heading firmly higher. At the same time, technical indicators advance within positive levels, still far from suggesting overbought conditions.
In the near term, and according to the 4-hour chart, EUR/USD is extremely overbought, with technical indicators barely retreating from their recent peaks but still at extreme readings. The 20 SMA, in the meantime, turned sharply higher but stands roughly 200 pips below the current level while above the longer ones, reflecting the strong rally. The pair may consolidate or retrace modestly before the next leg up.
Support levels: 1.1575 1.1530 1.1490
Resistance levels: 1.1640 1.1685 1.1720
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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