EUR/USD stages a correction amid sustained pressure

The euro remains under pressure as escalating trade risks fuel market anxiety. A sharp sell-off was triggered by Donald Trump's announcement of a potential 100% tariff on Chinese goods, spurring a flight to safe-haven assets and boosting demand for the US dollar. This initiative is seen as a significant escalation in trade confrontation, posing a substantial threat to global exporters—particularly the eurozone economy, which is deeply integrated with China through complex supply chains and industrial exports.

Macroeconomic data from Europe continues to send mixed signals. While Germany's industrial production index shows tentative signs of stabilisation, business activity in the services sector is contracting. Given the mounting risks to external demand and signs of cooling domestic consumption, markets are increasingly pricing in the prospect of more dovish rhetoric from the European Central Bank in its upcoming communications.

Conversely, the United States maintains steady economic momentum, underscored by robust labour market data and resilient consumer spending. This strength reinforces market expectations that the Federal Reserve will keep interest rates at their current levels for longer than previously anticipated. The widening monetary policy divergence between the ECB and the Fed remains a primary anchor on the euro.

Amid the prevailing political and trade turbulence, EUR/USD is experiencing heightened volatility. Any further escalation in protectionist rhetoric from Washington or a flare-up of geopolitical tensions in Asia could precipitate a further decline in the pair towards 1.1520 and below.

Technical analysis: EUR/USD

H4 Chart:

Having found a support base at 1.1592, EUR/USD is currently unfolding a corrective wave towards 1.1644. We anticipate this correction concluding today, paving the way for a new declining wave targeting 1.1520. The bearish move has the potential to extend further towards 1.1500 and 1.1466. This scenario is technically confirmed by the MACD indicator, whose signal line, while below zero, is currently pointing upwards, indicating the ongoing corrective nature of the move.

H1 Chart:

The pair formed a consolidation range around 1.1592, which subsequently expanded to 1.1629. Following a retest of 1.1592 from above, the market is now correcting. We expect this upward move to reach at least 1.1639 today. It is crucial to view this entire upswing as a correction within the broader downtrend. Once this correction is complete, we anticipate the initiation of a new downward wave towards a minimum target of 1.1522. Technically, this outlook is supported by the Stochastic oscillator, with its signal line above 50 and pointing firmly upwards towards 80.

Conclusion

While the EUR/USD is experiencing a technical correction, the fundamental backdrop of trade risks and central bank policy divergence continues to favour the US dollar. The path of least resistance remains downward, with key support levels at 1.1520 and 1.1500 in focus once the current corrective bounce exhausts itself.