EUR/USD Forecast: Bearish pressure builds up as mood sours
- EUR/USD trades below 1.1700 in the European session on Friday.
- The US Dollar (USD) benefits from the risk-averse market atmosphere.
- Trump said that the EU will receive the tariff letter soon.
After closing marginally lower on Thursday, EUR/USD stays on the back foot on Friday and trades below 1.1700. The near-term technical outlook highlights a buildup of bearish momentum.
Euro PRICE This week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the weakest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.85% | 0.82% | 2.03% | 0.78% | -0.19% | 0.83% | 0.46% | |
| EUR | -0.85% | -0.03% | 0.93% | -0.09% | -0.97% | -0.02% | -0.40% | |
| GBP | -0.82% | 0.03% | 0.94% | -0.04% | -0.93% | 0.01% | -0.49% | |
| JPY | -2.03% | -0.93% | -0.94% | -1.00% | -1.97% | -0.96% | -1.49% | |
| CAD | -0.78% | 0.09% | 0.04% | 1.00% | -0.95% | 0.06% | -0.45% | |
| AUD | 0.19% | 0.97% | 0.93% | 1.97% | 0.95% | 1.06% | 0.45% | |
| NZD | -0.83% | 0.02% | -0.01% | 0.96% | -0.06% | -1.06% | -0.51% | |
| CHF | -0.46% | 0.40% | 0.49% | 1.49% | 0.45% | -0.45% | 0.51% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
The US Dollar (USD) benefited from the risk-averse market atmosphere and the better-than-expected weekly Initial Jobless Claims data, not allowing EUR/USD to stage a rebound.
US President Donald Trump announced late Thursday that they will impose a 35% tariff rate on goods imported from Canada, beginning August 1. Trump also noted that they are planning to impose blanket tariffs of 15%-20% on most trade partners. Regarding the trade relations with the European Union (EU), he said that the EU will be receiving a letter notifying them of new tariff rates "today or tomorrow."
The economic calendar will not offer any high-tier data releases on Friday. Hence, markets will remain focused on risk perception and fresh developments surrounding a potential EU-US trade deal. At the time of press, US stock index futures were down between 0.4% and 0.5%. A bearish action in Wall Street heading into the weekend could help the USD stay resilient and make it difficult for EUR/USD to shake off the bearish pressure.
In case the EU and the US come to terms on trade, however, the Euro could attract buyers with the immediate reaction and reverse its course.
EUR/USD Technical Analysis
EUR/USD trades below the lower limit of the ascending regression channel and stays a tad below the 100-period Simple Moving Average (SMA) on the 4-hour chart. Additionally, the Relative Strength Index (RSI) indicator stays near 40, reaffirming the bearish stance in the short term.
On the downside, 1.1650 (Fibonacci 23.6% retracement of the latest uptrend) aligns as the first support level before 1.1600 (static level, round level) and 1.1560 (200-period SMA). Looking north, resistance levels could be seen at 1.1700 (static level, round level), 1.1740 (50-period SMA) and 1.1800 (static level, round level).
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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Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
