EUR/USD Drops Below 1.1700 on Tariff Concerns, Boosting Dollar to 2-Week High

• EUR/USD Experiences First Weekly Decline in Three Weeks, Closing at 1.1688
• President Trump Considers Comprehensive Tariffs, Targeting EU and Copper Exports
• US Dollar Achieves Strongest Week Since March Amidst Widespread Market Caution

Ending the week with a decline of over 0.70%, the EUR/USD pair closed Friday’s trading session down by 0.10%, settling below the 1.1700 mark. This movement underscores a potential retest of critical support levels as the US Dollar records its strongest week in four months, currently trading at 1.1688.

A cautious market sentiment was ignited by US President Donald Trump’s continued push for expanding tariffs not only on specific countries but also on commodities like copper. Reports have surfaced about potential comprehensive tariffs and a targeted approach towards the European Union (EU), which has recorded its first weekly downturn in three weeks.

The economic calendar was relatively light in both the US and Europe, featuring appearances by Federal Reserve officials and the release of June’s Wholesale Prices data from Germany.

Market Movers Daily Digest: Euro Under Pressure as Trump Prepares Tariff Letter for EU

• The Euro faced downward pressure following reports of President Trump’s plans to dispatch a tariff letter to the EU. Additionally, he has implemented 35% tariffs on Canada and is reportedly considering blanket tariffs of 15% to 20%, indicating an intensification of the trade conflict.
• Austan Goolsbee, Chicago Fed President and a 2025 voting member, commented that the new tariff measures complicate the true assessment of economic performance. He mentioned that these tariffs might postpone rate cuts, preferring to wait until market anxieties subside before confirming that the US economy is on course for a smooth recovery.
• European Central Bank (ECB) officials expressed varied views on monetary policy. Isabel Schnabel took a hawkish stance, suggesting that the threshold for further rate cuts is quite high, with no immediate need for easing unless inflation significantly deviates from the ECB’s 2% target, which she currently sees no indication of.
• Conversely, ECB’s Fabio Panetta showed a slight dovish tilt, noting that escalating downside risks to growth and increased disinflationary pressures might necessitate additional monetary easing.
• In Germany, Wholesale Prices increased by 0.2% month-over-month in June as anticipated, a rebound from May’s 0.3% decline. Annually, prices rose from 0.4% to 0.9% for the same period.

Technical Outlook for Euro: EUR/USD Drops Below 1.1700, with Potential to Reach 1.1500

The EUR/USD pair has broken below the 1.1700 level but remains above the 20-day Simple Moving Average (SMA) of 1.1662. Although it has rebounded to its current price levels, staying below 1.1700 suggests more potential for a downward movement.

The initial support is at the 20-day SMA. If this is breached, the next targets would be 1.1650, followed by the 50-day SMA at 1.1464.