EUR/USD analysis: geopolitical tensions retook center stage ahead of NFP

EUR/USD Current price: 1.1673

• Trump announced steel and aluminum tariffs on the EU, Canada, and Mexico.
• Italian 5 Star Movement and the League complete agreement on a coalition government.

So much for easing geopolitical tensions. The good mood was wiped out by headlines coming from the US,  as the Commerce Secretary Ross announced that EU, Canada, and Mexico will start paying tariffs on steel and aluminum starting June 1st. Mexico and Europe didn't take long to respond, with the EU announcing duties  “on a number of imports from the United States,” while Mexico announced taxes on US exports of different farm products. Safe-haven assets, which were under pressure, got a boost with the headline, although news that the Italian 5 Star Movement and the League parties have reached a new agreement on a possible coalition government, putting Paolo Savona at European affairs and making of Giovanni Tria the new Economy Minister. Risk was put back in pause, while volatility shrinks as speculative interest turns cautious ahead of Friday's US Nonfarm Payroll release.

Such headlines overshadowed macroeconomic data, although worth mention that European inflation picked up in May, reaching 1.9% YoY, while in the US, core PCE inflation came as expected at 1.8%. Friday will bring the final EU Markit Manufacturing PMI, alongside with the mentioned US NFP report. The US economy is expected to have added 188K new jobs in the month, while the unemployment rate is seen steady at 3.9%. Wages are expected to post modest upticks, seen up 0.2% monthly basis, from 0.1% previously, while the year-on-year number is forecasted at 2.7% from 2.6% in April.

The EUR/USD pair reached a daily high of 1.1723, before retreating to the 1.1660 region, spending most of the US session hovering around this last. The pair topped at the 23.6% retracement of its latest slump and 5 pips below its weekly high, making of the 1.1730 price zone a major resistance for this last day of the week. Ahead of the Asian opening, the pair presents a short-term positive stance as in the 4 hours chart, it holds above a flat 20 SMA, while the Momentum indicator continues heading north near overbought reading, while the RSI lost upward strength, but holds around 53. The NFP report will for sure bring some action, particularly if the figures come in line with the dominant dollar's strength.

Support levels: 1.1625 1.1590 1.1550   

Resistance levels: 1.1700 1.1730 1.1770

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