EUR/USD Forecast: Trumped by tariff threats and ECB uncertainty – bears dominate
|- EUR/USD has been struggling with threats of new tariffs and weak data.
- Speculation about the next ECB President remains a significant market mover.
- Tuesday's four-hour chart suggests more falls are likely.
When one trade front (partially) calms, another one opens – and the euro is learning this first hand. US President Donald Trump and his team have been mulling tariffs against the EU that they accuse of subsidizing Airbus – the European Aeronautics giant – thus providing an unfair advantage over American rival Boeing. The euro has been retreating in response.
EU leaders are reconvening in an attempt to divvy up the top jobs. German Chancellor Angela Merkel has tried to push center-left Dutchman Frans Timmermans as the President of the European Commission, yet without success. The nomination of the next president of the European Central Bank hinges on the divvying up of the top jobs, with the EC President one being first and foremost.
Some analysts speculate that if Merkel is successful in pushing Timmermans through, the president of the ECB may be a Frenchman such as Benoît Cœuré or François Villeroy de Galhau – both considered monetary doves – thus weakening the common currency.
Moreover, German retail sales have dropped by 0.6% in May, adding to the pressure.
On the other side of the Atlantic, US ISM Manufacturing PMI has come out at 51.7 points in June, above estimates – raising expectations for Friday's all-important jobs report. John Williams, President of the New York branch of the Federal Reserve, will speak later today and may shed light on the next moves by the central bank.
Will the Fed only reduce interest rates once? Or is it the beginning of a long cycle? That is a question markets are grappling with. The US-Sino trade truce has lowered the chances of a 50 basis points rate cut in July.
With the absence of critical economic releases, politics remains in the spotlight.
EUR/USD Technical Analysis
EUR/USD has dropped below the 50 and 100 Simple Moving Averages on its way down. Moreover, the currency pair is suffering downside momentum and the Relative Strength Index is leaning lower. All in all, bears are in control.
Initial support awaits at 1.1275 which has supported EUR/USD earlier today. The next cushion is 1.1250 that has capped the pair in mid-June. It is followed by the round number of 1.1200 which provided support around that time, and then by 1.1180.
Resistance awaits at 1.1320, which was a stepping stone on the way up in mid-June. Next up, we find 1.1350 which is a clear separator of ranges – holding EUR/USD down in mid-June and providing support later that month. 1.1390 capped in recent weeks, and 1.1410 was the high point last month.
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