The EUR/USD pair bounced back from its low of 1.1213 but kept falling to 1.1285. The US dollar rallied fiercely following a court decision that reversed Donald Trump’s tariffs on trade, which caused a fall. Due to the verdict, global market sentiment was better, stocks were up, and fear of inflation was temporarily removed. Therefore, there is volatility on all currency trading platforms as traders wait for the next US GDP data.
How Will the US Dollar Move After Tariff Ruling?
The US Court of International Trade issued a decision stating that only Congress has the authority to impose trade tariffs. The decision consequently raised financial market optimism, which caused stocks in Asia and Europe to rise sharply. Investors perceived the announcement as a relief from the inflationary pressures caused by those taxes.
The EUR/USD pair losses widened as the currency trading space saw renewed interest in the greenback. However, the US Dollar Index surged 1.8% from the previous week’s low and soared above the critical 100.00 level. The Federal Reserve’s rate cuts were priced in at 42 basis points, down from 50 earlier in the week.
Technical Signals Point to Possible Further EUR/USD Pair Losses
The EUR/USD pair is currently testing support close to the low at 1.1215 after falling below the ascending trend channel. Despite indications of a slight recovery, momentum is still negative for the pair. The 4-hour chart’s RSI is close to 42, suggesting that the downside pressure is still present.
Immediate resistance is at 1.1285, a former support turned resistance, followed by 1.1315, which coincides with a reversed trendline. Thus, a drop below 1.1215 could lead to further losses for the EUR/USD exchange rate. Key levels 1.1130 and 1.11065 are the next ones. Technical indicators show that bears are still in control as market sentiment changes.
Can Economic Reports Shift Market Sentiment in Currency Trading?
The US government’s swift appeal could slow the rally’s momentum, even though the court’s decision temporarily brought calm. In the short term, legal uncertainty might prevent the US dollar from making more gains.
In Europe, rising Italian business and consumer confidence figures are providing some relief. This prevents the Euro from dropping further in response to weaker labor data from France and Germany. Nonetheless, market sentiment is still greatly influenced by US economic indicators.
Additionally, investors are now paying attention to the second estimate of the US GDP. According to the estimate, the first quarter will see a contraction of 0.3%. Furthermore, Friday’s PCE inflation data and weekly jobless claims will provide more information. Whether the EUR/USD pair’s losses continue into the next week or if they momentarily stall depends on their sentiment.
What’s Next for the EUR/USD Pair and Dollar Strength?
The short-term outlook continues to depend on data. If the US GDP data is weak or Fed officials seem cautious, the losses in the EUR/USD pair might pause. However, if inflation surprises to the upside, dollar strength could return.
The environment for currency trading will continue to be cautious until then. There is still a chance for more downside because traders are keeping a careful eye on important resistance levels. Therefore, as macroeconomic concerns take center stage, market sentiment currently supports the US dollar.
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