Article by: ETO Markets
This week, currency markets were significantly influenced by escalating Trump’s new tariff measure, especially US-China trade tensions. In Europe, the EUR/USD pair rallied as the Euro strengthened and the US Dollar weakened, with the Euro attracting safe-haven flows despite market expectations of an ECB rate cut in April. US President Trump's new tariffs on all trading partners and the EU intensified these tensions. Although a temporary suspension of tariffs for non-retaliating countries was announced, the simultaneous increase in tariffs on China led to a brief Dollar rebound, highlighting the market's sensitivity to trade policies. Investors are closely watching the ECB's future decisions amid revised Eurozone GDP forecasts and expectations for further rate easing. Technically, the pair faces resistance at a recent high and support at a prior low.
In the Asian Pacific region, the Japanese Yen demonstrated strength against the Dollar, driven by the trade war and differing monetary policies between the BoJ and the Fed. Stronger-than-expected Japanese PPI data bolstered the Yen, fueling speculation of a more hawkish BoJ stance. China's retaliatory tariffs on US goods increased global risk aversion, enhancing the Yen's safe-haven appeal and pushing USD/JPY lower. Market expectations point to potential Fed rate cuts in response to trade-induced economic slowdowns, while the BoJ may consider rate hikes to address inflation, narrowing the interest rate differential. Meanwhile, the Australian Dollar faced downward pressure, reaching a multi-month low due to its exposure to US-China trade tensions given Australia's economic ties with China. The RBA maintained its cash rate, citing ongoing inflation risks, but the AUD rebounded following the tariff suspension announcement. The RBA's cautious inflation outlook suggests a delay in rate cut plans, with China's economic health and global trade developments remaining crucial for the AUD's trajectory
The Euro versus the US Dollar (EUR/USD) has pulled back from its recent surge, consolidating its position after reaching a 2025 peak of 1.1146 on April 3rd. The pair is currently trading around the 1.0977 mark, following a period of strength driven largely by broad US Dollar softness amid ongoing US trade tensions, particularly with China. However, weighing on the Euro is the anticipation of the European Central Bank meeting on April 17th, where a further interest rate cut of 25 basis points is widely expected, potentially increasing the policy divergence with the US Federal Reserve which remains concerned about persistent domestic inflation. Adding to headwinds is the significant threat of the US imposing substantial tariffs on European Union imports, a move that economists suggest could noticeably dent Eurozone GDP growth. Nevertheless, underlying support for the currency pair stems from the uncertainty surrounding US trade policy globally and its potential impact on the US economy itself. Market sentiment reflects this caution, with speculative traders having reduced their net long Euro positions, although the overall positioning remains positive, while retail traders are predominantly short, often seen as a contrarian bullish indicator.
From a technical standpoint, EUR/USD is navigating a consolidation phase below the recent … high. The daily chart shows the price retreating towards key support zones after failing to hold gains near the … level earlier in the week. Immediate resistance lies near the recent daily high around 1.0995, followed by the upper Bollinger Band at …, with the major obstacle remaining the year-to-date high at 1.1146. On the downside, initial support is found in the … to … area, encompassing recent daily lows and the 50% Fibonacci retracement level of the prior upswing, reinforced by the nearby EMA9 (…) and the Volume Weighted Average Price (VWAP) around 1.0918. Should this zone give way, the next significant support rests at the … level, which aligns with both the 20-day Simple Moving Average and the middle Bollinger Band. Further weakness could target the 61.8% Fibonacci retracement level around 1.0897 and potentially test the 21-day Exponential Moving Average near …. While the RSI indicator at 61.81 remains in bullish territory but has eased from higher levels, and the MACD shows waning upward momentum, suggesting the corrective phase could persist before a clearer directional bias emerges.
The Australian Dollar remains under considerable fundamental pressure, hovering near multi-year lows around the 0.6180 mark despite a recent technical bounce. The currency's weakness stems primarily from escalating global trade tensions, particularly the United States imposing hefty tariffs of up to 125% on Chinese imports, impacting Australia significantly due to its close trade relationship with China. Compounding this are concerns over China's economic momentum following weaker-than-expected inflation figures and a fragile domestic Australian outlook evidenced by lagging business and consumer confidence. Furthermore, expectations for aggressive Reserve Bank of Australia easing, with markets pricing in 100 basis points of cuts possibly starting in May, contrast sharply with a more cautious US Federal Reserve. The Fed faces dual risks of tariff-induced inflation and slowing growth, potentially delaying its own rate cuts and thus strengthening the US Dollar relative to the Aussie. Providing minor support, however, is the prospect of renewed trade negotiations between Australia and the European Union and the potential for a downside surprise in the upcoming US Consumer Price Index data, which could reignite Fed rate cut speculation. Market sentiment is cautious but fundamentally bearish; while retail traders appear to be buying the dip according to Myfxbook data, institutional positioning via CFTC reports shows substantial net short positions against the AUD, suggesting professionals anticipate further declines despite the recent recovery from oversold conditions.
From a technical perspective, AUD/USD's recent bounce from the significant low near …, its weakest point since March 2020, appears corrective within a broader downtrend. The pair closed around …, managing to reclaim ground above the 9-day Exponential Moving Average (EMA) at …, which now acts as initial support. However, immediate resistance looms near the recent daily high of …, closely followed by the 21-day EMA at …. A more substantial barrier lies around the …-… zone, encompassing the 20-day Simple Moving Average (SMA) and the 50-day SMA/EMA. Key support below the 9-day EMA sits near the psychological … mark, coinciding roughly with the lower Bollinger Band at …. The critical support remains the recent trough around …; a sustained break below this level would open the door towards the … handle. Indicators reflect this consolidation after the sharp fall: the 14-day Relative Strength Index (RSI) at 46.92 is below the neutral 50 mark, aligning with the bearish bias, while the MACD indicator remains in negative territory with the MACD line below the signal line. However, Stochastics are turning upwards from oversold territory, supporting the notion of a short-term bounce or consolidation phase, underlined by a low ADX reading of 14.72 suggesting the previous strong trend has weakened for now.
