EUR/USD price struggles amid trade tensions on European cars
EUR/USD opened the week with a gap down to 1.0284 but recovered mildly to 1.0325 before settling at 1.0316 in the European session.
The pair now approaches the 1.0331 resistance level, a key technical barrier. However, despite the brief recovery, EUR/USD price movement on both the daily and four-hour timeframes remains weak. The downward momentum, reinforced by a bearish RSI, raises the risk of extending losses for a third consecutive bearish day and possibly reaching a five-day low.
The euro faces additional downside risks beyond technical weakness. Trade tensions between the U.S. and the Eurozone threaten to create further instability. The Eurozone currently imposes a 10% tariff on U.S. automobile imports, while the U.S. levies only a 2.5% duty on European cars. If the U.S. retaliates with additional tariffs, it could significantly impact the European automotive sector, a critical component of the region’s economy. Analysts at Macquarie have warned that the U.S. may target the EU aggressively, escalating trade disputes.
EUR/USD price dynamics (November 2024-February 2025). Source: TradingView.
ECB rate cuts and policy divergence add pressure on euro
Adding to the euro’s vulnerability, the European Central Bank is preparing to continue its rate-cutting cycle. Some policymakers have even suggested that rates might need to go below the neutral level to support economic growth. With inflation struggling to reach the ECB’s 2% target and economic contraction risks rising, monetary policy divergence between the ECB and the Federal Reserve could further weaken the euro against the dollar.
The combination of weak technical indicators, rising trade tensions, and dovish ECB policy puts EUR/USD at risk of further declines. If the pair fails to break above 1.0331, selling pressure could intensify, potentially driving prices toward new lows. A sustained move below 1.0284 would reinforce bearish momentum, while only a clear break above resistance would indicate any short-term recovery potential.
EUR/USD price ended a three-day bullish streak falling below the Fibonacci 50% retracement level. Trade tensions between the US and the EU add further uncertainty to the euro’s outlook.
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