EUR/USD Under Pressure as Tariff Deadline and ECB Loom

EUR/USD Under Pressure as Tariff Deadline and ECB Loom

EUR/USD is ending the week near its lowest levels, hovering around the critical 1.04 handle as market attention shifts toward next week’s March 4 tariff deadline involving Canada and Mexico. Although not directly targeting the EU, aggressive U.S. tariffs could set a precedent that negatively impacts market sentiment toward the euro. Recent comments by French President Emmanuel Macron, expressing pessimism regarding trade progress, have further emboldened EUR/USD bears. Meanwhile, the ECB policy meeting next week, where another 25 basis point cut is widely expected, adds to downward pressure. Markets will focus intensely on forward guidance and updated economic projections, as more dovish outcomes are likely given persistent uncertainties surrounding U.S. trade policy.

From a technical perspective, EUR/USD remains within a tight range between 1.0380 and 1.0420, with critical support at the 55-day moving average around 1.0390-95. A decisive break below this support level would confirm bearish momentum, potentially opening the door to a deeper sell-off toward the 1.0300 psychological support area. Resistance levels are clearly defined at 1.0450-60, marked by the 200-hour moving averages, and further resistance at the stronger 1.0500-1.0530 zone, which has capped recent recovery attempts.

Looking forward, the combination of heightened tariff concerns and a potentially dovish ECB stance reinforces the bearish outlook. With markets pricing in back-to-back ECB cuts until rates reach 2% by June, upside potential for EUR/USD remains severely limited. Any further escalation in trade tensions, particularly if tariffs are confirmed, will likely see EUR/USD test new year-to-date lows near the 1.0300 handle, reinforcing the current bearish bias.