EUR/USD has surged to 1.1145, achieving nearly 2.5% gains, attributed to weakness in the US Dollar. The US Dollar Index (DXY) fell to approximately 101.30, marking a six-month low.
Concerns arose following tariffs announced by US President Trump, which may affect the US economy and contribute to potential recession risks. Market predictions suggest these tariffs could impede the Federal Reserve’s inflation goals.
Focus On Upcoming US Economic Data
The US Nonfarm Payrolls data for March will be released on Friday, with the ADP Employment Change indicating 155K new private sector jobs. Additionally, the US ISM Services PMI for March was weaker than anticipated at 50.8.
The Euro’s strength counters fears of a trade war as the European Commission prepares countermeasures against US tariffs. ECB officials believe these tariffs will not deter potential rate cuts, but will negatively impact Eurozone GDP growth by 0.3%-0.4%.
The EUR/USD pair has achieved a breakout above 1.0955, with technical indicators suggesting a bullish trend. Key support levels include the mid-March resistance zone at 1.0955 and the March high at 1.0850. A major barrier for the Euro lies at the September high of 1.1214.
What we’re seeing is a strong momentum shift in favour of the Euro, with the pair climbing steadily past several key technical thresholds. That 2.5% move upwards to 1.1145 isn’t just about currency flows—it’s more likely a reaction to growing fragility in the US economic outlook, most clearly reflected in the retreat of the Dollar Index to 101.30, now at a level we haven’t seen in half a year.
Impacts Of US Trade Policy And Market Reaction
Pressure appears to be mounting on the Federal Reserve, especially after Washington’s decision to impose fresh tariffs. These measures, announced by Trump, have not only rattled confidence in future trade flows, but they’ve also forced investors to reassess what the path looks like for both inflation and monetary policy. If tariffs push up costs but slow demand, it puts the Fed in a dilemma. So far, central bankers have been walking a fine line, aiming to contain price pressures without choking off growth. But trade restrictions complicate that balance.
Markets typically look to job data for clarity, and with Nonfarm Payrolls due this Friday, attention has turned to labour market temperature. The private sector posting 155,000 new roles, as per the ADP survey, wasn’t especially weak but did fall below average growth levels of the last year. Couple that with a Services PMI barely holding above expansion territory at 50.8, and there’s more justification for Dollar softness. In a lower-yield, lower-growth backdrop, there’s little incentive to hold Dollar-heavy positions.
On the European side, policymakers seem prepared to accept a short-lived downward impact on growth stemming from the US tariffs. According to projections, GDP could dip by as much as 0.4%. That hasn’t stopped discussions around fresh stimulus tools or potential rate adjustments, but rather reinforced the idea that trade fallout does not change the internal policy discussion. The view seems to be that any countermeasures from Brussels will be targeted and controlled.
Meanwhile, chart patterns are playing their part. The clean breach of 1.0955, which had capped rallies in mid-March, opens space for higher movement. Dip buyers are now likely to look for entries around that level, while 1.0850—the high in early March—adds a second layer of support. On the upside, 1.1214 marks a clear resistance barrier, likely to attract attention from bears trying to fade the rally.
From a trading strategy perspective, it’s prudent to monitor momentum around that latter level. Should price action continue with higher lows on minor retracements, it may indicate strong sustained interest from buyers. Conversely, rejection from the upper bounds would offer short-term positioning opportunities, especially if upcoming US data fails to provide a clear direction.
We should be watching futures curves too. If rate expectations in the US shift lower while Europe remains broadly stable, the interest rate differential could further favour the Euro. This calculus is already playing out in options pricing, with implied volatility rising on the upside for EUR/USD—suggesting that short-term risk is skewed to the north side.
Equally, traders should not disregard political variables. Sentiment has proven especially reactive to rhetoric, not just policy details. Any further escalation in trade commentary, or a change in stance from either side of the Atlantic, could reprice assumptions quickly. Flexibility in position sizing and tighter intraday stops would be advisable.
In the interim, the bias remains clear: underlying support levels are holding, economic momentum in the US is becoming patchy, and technical indicators are flashing continued strength for the Euro.
