The EUR/USD currency pair is retreating after touching a multi-month peak at 1.1473, now trading near the psychologically significant 1.1300 mark. The pullback comes as traders opt for profit-taking ahead of the weekend and amid persistent uncertainty in global markets.
Despite ongoing fears of a U.S. recession and escalating tensions between Washington and Beijing, Wall Street managed to post modest gains. Meanwhile, technical indicators suggest the euro-dollar pair was due for a correction. The Relative Strength Index (RSI) on the 4-hour chart surpassed 80 earlier in the session, signaling overbought conditions and prompting cautious repositioning by traders
Trade Tensions Trigger Dollar Weakness
A key driver of the EUR/USD price action has been the heightened geopolitical strain between the United States and China. On Friday, China’s Ministry of Finance confirmed it will raise tariffs on American goods from 84% to 125% starting April 12. This move came in retaliation to Washington’s most recent tariff increase.
The tariff escalation accelerated the selloff in the U.S. dollar, pushing the euro higher earlier in the European session. However, that rally has since lost steam due to investor caution and profit booking.
Key pressure points include:
- Support levels: 1.1300 (current), followed by 1.1200
- Resistance levels: 1.1500, 1.1535 (November 2021), and 1.1600
In parallel, U.S. Treasury bonds experienced continued selling pressure, reinforcing fears of weakening investor confidence in the American economic outlook.
Markets Eye Data, But Trade War Dominates
Although the U.S. economic calendar features potentially market-moving data—including March’s Producer Price Index (PPI) and April’s University of Michigan Consumer Sentiment Index—traders appear more fixated on geopolitical developments.
Market watchers say if President Trump escalates tariffs further, the dollar could face additional downward pressure. Conversely, any signs of diplomatic de-escalation could prompt a rebound in the greenback.
For now, the market sentiment remains fragile. With EUR/USD hovering near key technical levels, the upcoming days will be pivotal in determining whether the euro can sustain recent gains or continue its retreat.
This evolving mix of macroeconomic uncertainty, technical signals, and trade policy headlines will likely keep EUR/USD volatility elevated as the week closes.
