EUR/USD is on a tear this morning after yesterday's tariff announcements and a positive PMI release. The pair is now trading at multi-month highs above the 1.1000 psychological level.
US President Donald Trump announced on "Liberation Day" that a 10% tariff on all imports to the US will start on April 5. Additionally, higher tariffs targeting around 60 countries, labeled as "worst offenders," will begin on April 9. The European Union is among these countries and will face 20% tariffs.
Source: LSEG, The White House
Source: LSEG, The White House
In response, European Commission President Ursula von der Leyen stated on Thursday that these US tariffs will significantly harm the global economy. She also mentioned that the EU is working on new measures to defend its interests.
The impact of this has seen the US Dollar face significant selling pressure, with the DXY now hovering close to the 102.00 level (September 2024 levels).
US Dollar Index (DXY) Daily Chart, April 3, 2025
Source: TradingView.com
Source: TradingView.com
At the moment, EUR/USD appears to be riding the wave of a weaker US Dollar. Recent US data has also been underwhelming and could explain part of the move.
Positive PMI data adds to the Euros appeal. Is the momentum sustainable?
The eurozone's private sector economy grew slightly in March, marking the third month in a row of increased business activity and ending the first quarter of 2025 on a positive note. While this was the strongest growth since August 2024, it was still modest and below the survey's long-term average.
Despite a drop in new orders, businesses managed to increase output, and employment rose for the first time since last July. Price pressures eased, with input costs and output prices rising at their slowest rates this year.
The HCOB Eurozone Composite PMI® Output Index, which combines manufacturing and services data, rose to 50.9 in March from 50.2 in February. This indicates slight growth (any reading above 50.0 shows expansion) and the fastest pace in seven months, though still below the long-term average of 52.4.
Both manufacturing and services contributed to the growth. Manufacturing output increased for the first time in two years, and services activity grew faster than in February, though both saw only mild improvements.
Most eurozone countries reported higher business activity in March, except for France, which saw its seventh straight month of decline, though at a slower pace. Ireland led the growth, reaching a four-month high, just ahead of Spain. Germany and Italy also saw modest growth, with Germany achieving its strongest activity in ten months.
Despite the positive from the data above markets have increased their rate cut bets following a better than expected inflation print as well. A sign that market participants are not completely sold on the Euro rally over the longer term just yet.
Looking Ahead
There is still a lot left this week from a data perspective but market participants may keep an eye on tariff developments over economic data releases. This has been a growing trend of late.
Later today, attention will shift to the S&P Global and ISM Services PMI data for March, which will be released during US trading hours. The S&P Global Services PMI is expected to match the earlier estimate of 54.3, while the ISM Services PMI is predicted to drop slightly to 53.0 from February's 53.5, indicating moderate growth in the services sector.
The week will wrap up with US Nonfarm Payrolls (NFP) data for March, set to be released on Friday. This official jobs report will shape market expectations for the Federal Reserve's future monetary policy. Earlier, on Wednesday, the ADP Employment Change report showed the private sector added 155,000 jobs in March, much higher than the forecast of 105,000 and February's 84,000.
For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge)
For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge)
Technical Analysis - EUR/USD
Looking at EUR/USD from a technical standpoint, and the rally to the upside has run into a multi-month resistance level.
The other concern for bulls at this stage is that the RSI period 14 for EUR/USD is in overbought territory while the DXY is languishing in oversold territory. This could be worth paying attention as and when a drop materializes it could prove to be an aggressive one.
Market participants have upped their rate cut bets from the ECB to 92%, from 80% prior to last nights announcements by President Trump.
The next move for EUR/USD will depend on developments around the US Dollar in my opinion. Weaker data this week from the US will increase recessionary fears and thus could weigh on the US Dollar and by extension push EUR/USD toward the 1.1200 resistance handle.
Any positive data however, is unlikely to have a lasting impact as i expect the spectre of tariffs to continue to hover over market sentiment and the US Dollar in particular.
EUR/USD Daily Chart, April 3, 2025
Source:TradingView.com
Source:TradingView.com
Support
1.1000
1.0948
1.0900
Resistance
1.1100
1.1200
1.1400
Follow Zain on Twitter/X for Additional Market News and Insights@zvawda
Important - This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors - not necessarily OANDA's, its officers or directors.
