EUR/USD Forecast: Euro turns oversold but remains fragile after Trump tariff threats
- EUR/USD trades deep in negative territory below 1.0250 on Monday.
- US President Donald Trump announced tariffs on Mexican, Chinese and Canadian imports.
- The technical outlook suggests that the pair has turned oversold.
EUR/USD started the new week under strong bearish pressure and dropped to its weakest level since mid-January below 1.0250. Although the pair's technical outlook points to oversold conditions in the near term, investors could refrain from betting on a steady recovery in the Euro following US President Donald Trump's tariff threats.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.10% | 0.62% | 0.33% | -0.07% | 1.08% | 0.50% | 0.10% | |
| EUR | -1.10% | -0.08% | 0.54% | 0.13% | 0.44% | 0.70% | 0.30% | |
| GBP | -0.62% | 0.08% | -0.50% | 0.22% | 0.53% | 0.78% | 0.39% | |
| JPY | -0.33% | -0.54% | 0.50% | -0.38% | 0.90% | 1.09% | 0.42% | |
| CAD | 0.07% | -0.13% | -0.22% | 0.38% | 0.04% | 0.58% | 0.18% | |
| AUD | -1.08% | -0.44% | -0.53% | -0.90% | -0.04% | 0.26% | -0.13% | |
| NZD | -0.50% | -0.70% | -0.78% | -1.09% | -0.58% | -0.26% | -0.40% | |
| CHF | -0.10% | -0.30% | -0.39% | -0.42% | -0.18% | 0.13% | 0.40% |
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).
Over the weekend, Trump announced that they will impose sweeping 25% tariffs on Mexican and Canadian imports and 10% on Chinese goods entering the US. While speaking to reporters on Sunday, Trump said that he would "definitely" impose tariffs on European imports but refrained from providing any details regarding the size or the timing.
Regarding this development, European Central Bank (ECB) policymaker Francois Villeroy de Galhau said on Monday that Trump's tariffs would increase economic uncertainty and added there will likely be further rate cuts.
The European economic calendar will feature the Harmonized Index of Consumer Prices (HICP) inflation data for January. In the second half of the day, the January ISM Manufacturing PMI data from the US will be looked upon for fresh impetus. Nevertheless, investors are likely to pay little to no attention to these releases, while keeping a close eye on headlines surrounding the US. If safe-haven flows continue to dominate the action in financial markets, EUR/USD could continue to stretch lower.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart edges slightly higher but stays below 30, reflecting oversold conditions.
On the downside, 1.0200 (static level, round level) aligns as immediate support before 1.0160 (static level from August 2022) and 1.0100 (static level, round level). Looking north, resistances could be spotted at 1.0290-1.0300 (Fibonacci 23.6% retracement of the latest downtrend, round level), 1.0350 (Fibonacci d38.2% retracement) and 1.0370 (200-period Simple Moving Average).
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.
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.
