Insights 
VT 
Key Points
- EURUSD rebounds from a three-month low near 1.1580 as the US dollar weakens.
- Tariff threats tied to Greenland inject political risk but cap euro upside.
The euro edged higher toward 1.1620, recovering from an earlier three-month low near 1.1580, as confidence in the US dollar softened following renewed tariff threats from US President Donald Trump.
The move reflects a modest unwind of long dollar positions rather than a decisive shift in euro fundamentals.
Trump warned of imposing 10% tariffs on several European countries in an attempt to pressure Denmark over the future of Greenland.
The rhetoric weighed on the dollar as markets reassessed trade and geopolitical risks, allowing EURUSD to stabilise after last week’s decline.
Trade Risks Cloud the Euro Outlook
While the initial reaction supported the euro, upside remains constrained. Analysts have highlighted the potentially severe political and geopolitical consequences of any attempt to seize Greenland, warning that such actions could strain NATO cohesion and damage transatlantic relations.
From an economic perspective, the impact of tariffs would not be evenly distributed. Germany and the UK, which have the largest export exposure to the US, would likely feel the sharpest effects.
Estimates suggest a 10% tariff could shave around 0.1% off GDP, while a 25% levy could reduce output by 0.2% to 0.3%. These risks have limited enthusiasm for sustained euro buying.
Retaliation Risks Add to Uncertainty
The European Union is reportedly considering retaliatory measures, including up to €93 billion in tariffs on US goods.
While this signals a willingness to respond forcefully, it also raises the risk of a broader trade confrontation, which could weigh on euro area growth prospects if tensions escalate further.
Technical Analysis
EURUSD staged a sharp intraday recovery after bottoming out at 1.15772, a move marked by a bullish engulfing candle and a corresponding spike in volume.
The price has since pushed above all major short-term moving averages (MA5, MA10, MA20, MA30), now clustering around 1.1626–1.1629, which may act as intraday support.
The rally met resistance at 1.16414, forming a minor double-top rejection in the short term. Price is now pulling back slightly, testing the 15-minute MA20.
Volume has begun to taper off, suggesting cooling momentum for now.
Cautious Outlook
Near term, further gains in EURUSD are likely to depend on continued softness in the US dollar rather than a strong euro-specific catalyst.
Any renewed escalation in trade tensions or geopolitical rhetoric could quickly reintroduce volatility, keeping the pair range-bound in the sessions ahead.
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