EUR/USD price falls below 200-day EMA on Trump trade policies
U.S. dollar index surges 1.6% on Election Day amid tariff fears
The U.S. Dollar Index saw an exceptional rise of 1.6% on election day, the highest single-day gain in nearly four years. Trump’s proposed 10% blanket tariffs on imports sparked this rally, driving up inflation expectations as import costs would likely surge. This dollar strength has left EUR/USD vulnerable, with the pair recently falling below its 200-day moving average, a key technical indicator that now hints at further downside risks.
Although EUR/USD rebounded to 1.0770 after dipping below 1.0700 following a turbulent reaction to Donald Trump’s victory in the U.S. presidential election. Market participants looking for a sustained recovery in EUR/USD may find limited prospects as trade policies under Trump, along with the Federal Reserve's cautious rate outlook, keep downward pressure on the Euro.
European economic pressures are also adding to the downside risks. This includes Germany’s political turmoil, following the collapse of its coalition government. Today, German industrial production contracted by 2.5% in September but surpassed expectations of a 1% drop. This adds to the burden on the Euro as investors eye ongoing risks to Eurozone stability, potentially keeping EUR/USD under pressure. If downward momentum continues, EUR/USD could revisit its June low of 1.0667.
EUR/USD outlook, downward pressure remains
While the Fed is widely expected to cut rates by 25 basis points, bringing rates down to the 4.50%-4.75% range, the pace of future cuts remains uncertain.
The market is now paying close attention to Fed Chair Jerome Powell’s press conference for clues on whether the central bank will pull back on easing if Trump’s tariffs drive inflation higher. If inflationary pressures pick up, the Fed may face a dilemma, as persistent rate cuts could become increasingly difficult to justify. This scenario presents a potential roadblock for EUR/USD’s rebound.
Trump’s trade policies create an additional high-stakes environment for the Euro, which is already struggling under domestic challenges. Market sentiment suggests any recovery might be short-lived, with 1.0800 acting as a potential ceiling if the Fed stays cautious and Trump’s protectionist stance fuels further Dollar strength.
EUR/USD bulls had high hopes for the euro to push past 1.0900. Unfortunately, the EUR/USD price dipped to a 5-month low on Trump poll lead
