US dollar gains as tariffs fear looms on markets. EURUSD loses 0.6% 📉

The US dollar index (USDIDX) strengthen today and EURUSD pair declines as Donald Trump will impose 25% tariffs to Mexico and Canada, effective since 1 February. Yesterday financial markets were happy, and US dollar slightly weakened amid absence of immediate broad tariffs on all trade partners, but potential future actions remain uncertain, especially about tariffs policy with China and European countries.

• Investors may fear that Trump will feel strong enough to impose tariffs also on European countries, despite European Commission president, Ursula von der Leyen signalling that the EU is ready to negotiate with the US. However, even she told today that '(...) The use of sanctions, export controls and tariffs likely to increase.'
• According to German's finance minister Habeck 'Trump's demands to possess higher shares of LNG exports into Europe could clash with market economies, where prices rule. Trump's tariffs will drive inflation and geopolitically divide the world.'
• China's Guo commented that 'China and the US have space for cooperation on economic ties.' but imposing tariffs on Chinese goods is still 'on the table'. As for now, Trump suggested that universal tariff 'could go on anyone doing business in the US but aren't ready for implementation yet.'

EURUSD (H1, D1 interval)

EURUSD is pressured today not only by 'Trump trade' but also much weaker ZEW index report from German economy. The macro points to prolonged economic problems in Europe, while economic conditions in the US are still strong. Also, European Central Banks definitely has a reason to cut rates furhter, and even jigher inflation may weaken the euro, because of the bad economic conditions (which may be even worse, if EBC will slow with cutting rates). Bond spreads and interest rates curve expectations are driving selloff on EURUSD. On the EURUSD we may see a double top formation with potental of retest the parity in a mid-term. However, rising above the 1.04 - 1.05 level may signal the trend reversal with the reverse head and shoulders technical pattern (the so-called neckline 1.043).

Source: xStation5

Source: xStation5