EUR/USD Bulls Maintain Edge but Face Growing Downside Risks from Tariff Fallout
Technical Analysis:
EUR/USD continued its impressive rally on Friday, briefly touching a three-year peak at 1.1474 during European trading, driven by persistent investor aversion to U.S.-related assets amid ongoing trade policy turmoil. Despite the initial strength, the pair relinquished some gains after the New York session began around 1.1335, retreating sharply to a session low of 1.1277 as improved sentiment toward U.S. assets resurfaced, driven by recovering equity markets and easing U.S. Treasury yields. Although EUR/USD ultimately settled higher at around 1.1300—still marking a daily gain of 0.85%—the formation of a daily candle with a long upper wick signals caution for bullish traders.
Momentum indicators remain supportive for the bullish outlook in the short-term, as both daily and monthly RSIs continue to trend higher, reinforcing underlying upward momentum. However, Friday’s price action hints at potential exhaustion or at least a short-term top. Traders should closely watch immediate resistance near Friday’s intraday high of 1.1411, with the key three-year peak at 1.1474 serving as a significant psychological barrier. A sustained close above these levels could open additional upside, potentially targeting the psychologically important 1.1500–1.1600 resistance zone.
On the downside, technical support is initially at Friday’s session low near 1.1277, followed closely by the key short-term psychological support at 1.1250. A break below these levels could trigger additional profit-taking, potentially accelerating a retracement toward the critical support at the former breakout zone near 1.1200. Given increasing market sensitivity to potential negative economic consequences of euro appreciation and U.S. tariffs, traders should remain vigilant for a shift in sentiment, possibly resulting in a deeper correction toward medium-term supports around 1.1050–1.1100.