EUR/USD Slips Below 1.0400: A Technical Weakness and US Tariff Threat
The European single currency, EUR, took a significant hit against the US dollar (USD) on Thursday, with the EUR/USD pair dropping nearly nine-tenths of one percent. This decline marks a return to the sub-1.0400 level for the first time in almost two weeks.
Technical Analysis
From a technical standpoint, the EUR/USD pair has been showing signs of weakness. This weakness can be attributed to several factors, including a bearish trendline resistance and a bearish divergence between the price and the relative strength index (RSI). The RSI, which measures the momentum of price movements, has been declining despite the price continuing to rise. This divergence is often seen as a bearish signal.
US Tariffs
Adding to the downward pressure on the EUR/USD pair is the renewed threat of US tariffs on European goods. The US Trade Representative (USTR) announced on Wednesday that it would begin collecting 25% tariffs on $11.2 billion worth of European imports, including aircraft, cheese, and wine. This follows the World Trade Organization’s (WTO) approval of US tariffs on European goods in response to EU subsidies for Airbus.
Impact on Individuals
For individuals holding EUR/USD positions, the decline in the pair could result in losses. Those looking to buy EUR with USD may find it more expensive to do so, while those looking to sell EUR may receive fewer USD in return. Additionally, the uncertainty surrounding the tariffs and their potential impact on the global economy could lead to increased volatility in the currency markets.
Impact on the World
The impact of the EUR/USD decline and the US tariffs on European goods extends beyond individual currency traders. The global economy could also be affected, particularly in Europe. The European Central Bank (ECB) may respond to the weakened EUR by implementing further monetary easing measures, such as lowering interest rates or increasing its quantitative easing program. This could lead to increased inflation in Europe and a further decline in the value of the euro.
The US tariffs could also lead to retaliation from Europe and other trading partners. This could result in a trade war, which would negatively impact global economic growth. Additionally, the uncertainty surrounding the tariffs and their potential impact on businesses could lead to decreased investment and a slowdown in economic activity.
Conclusion
The EUR/USD pair’s decline below 1.0400 and the renewed threat of US tariffs on European goods are cause for concern for both individual traders and the global economy. The technical weakness in the pair, combined with the uncertainty surrounding the tariffs, could lead to increased volatility in the currency markets. Additionally, the potential for a trade war and its impact on global economic growth is a significant risk that should not be ignored.
- EUR/USD pair declines below 1.0400 for the first time in two weeks
- Technical weakness in the pair, with bearish trendline resistance and bearish divergence between price and RSI
- US announces tariffs on $11.2 billion worth of European imports
- Potential for European Central Bank to implement further monetary easing measures
- Risk of trade war and decreased investment due to uncertainty surrounding tariffs
