EUR/USD ended the week with losses exceeding 0.70%, closing Friday’s session down 0.10% at 1.1688, falling below the 1.1700 level. This positions it for a potential dip to test support levels, as the US dollar experiences its best week in four months.

A risk-off mood was spurred by US President Trump’s tariff expansion plans, targeting commodities like copper, with a possible letter impending to the European Union. The economic schedule was sparse, featuring appearances from Federal Reserve officials and Germany’s Wholesale Prices data release.

Euro Faces Pressure Due To Tariff Discussions

The Euro faced pressure due to Trump’s tariff discussions with the European Union. Chicago Fed President Goolsbee noted tariffs complicate economic clarity, possibly delaying rate cuts. In the Eurozone, ECB officials expressed mixed views on monetary policy. ECB member Panetta suggested potential easing due to intensified downside risks. Germany’s Wholesale Prices rose by 0.2% in June, reversing a previous decline.

Technically, EUR/USD broke below 1.1700 but remains above the 20-day SMA at 1.1662, indicating potential further declines. Immediate support is seen at the 20-day SMA, 1.1650, and the 50-day SMA at 1.1464.

The Euro is the second most traded currency, representing 31% of all foreign exchange transactions in 2022.

With EUR/USD falling below the 1.1700 barrier and ending the week with a noticeable setback, we’re starting to see momentum shift towards a clearer downside. The move below that round number wasn’t just psychological—technicals seem to be reinforcing it. The short-term trajectory is tilting lower, as long as price action remains beneath the 20-day moving average. The 1.1660 region, marked by that average, should be considered the first area to monitor. If that gives way, the next standout level lies around 1.1650. Beyond that, the 50-day moving average nearer to 1.1460 poses a more substantial downside objective.

Market Dynamics And Positioning

Traders would do well to treat last week’s US dollar rally not as a one-off, but as part of a broader shift. The surge in demand followed a combination of tight monetary language from Federal Reserve representatives and a return of defensive sentiment after renewed trade friction signals from Washington. Goolsbee’s remark that tariffs cloud the economic picture struck a chord. It introduces an extra layer of uncertainty around US policy timing—particularly the timing and scale of any future interest rate adjustments. That lack of clarity naturally reduces conviction in risky positions, raising demand for safe-haven currencies like the dollar.

On the European side, officials spoke with inconsistent tones, which didn’t help the Euro regain a sense of direction. Panetta opened the door to possible easing by acknowledging looming risks to the downside. Though his view isn’t universally held within the ECB, his input introduces a doubt traders can’t easily ignore. With growth readings still uninspiring, and price indicators offering little assurance, we’re avoiding long Euro exposure in the near term. Germany’s wholesale price uptick, coming in at just +0.2%, is still meagre and does more to highlight subdued inflationary pressures than to suggest building momentum.

Volume and participation were relatively thin over the past week due to the lighter economic calendar, but that changes soon. More US data is on deck, and depending on how the dollar trades into those releases, reaction could be asymmetric. The greenback’s recent strength was its strongest in four months, meaning it’s already built in some degree of optimism. Any letdowns through economic surprises could cause an outsized counter-reaction.

What we’re seeing in EUR/USD isn’t just a test of one level—it’s the early phase of a pattern that will feed on how central banks balance inflation concerns with weak data. With nearly a third of global FX transactions touching the Euro, it remains exposed to wider market winds. How far sentiment against it develops may depend less on Eurozone performance and more on where the US dollar chooses to go from here.

Market participants operating with leveraged positions might want to reduce exposure near short-term resistance points or consider tightening stops around current moving averages. This helps avoid unnecessary drawdowns in what may be a more corrective phase for EUR/USD. There’s little benefit in fighting momentum as it’s building, particularly with news flow unlikely to turn immediate sentiment on its head in the very short term.

Positioning becomes especially delicate if the technicals align with further macro themes pointing in the same direction. Put simply, we’re not buying dips here—we’re watching for continuation.

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