Article by: ETO Markets
In this week, the EUR/USD rallied sharply as the Euro strengthened while the US Dollar weakened amid the Trump administration’s new flat and reciprocal tariff packages, calculated using net exports with a minimum of 10%. Investor sentiment was further dented by a nine-month low in the US ISM Services PMI, and market focus is shifting to the upcoming US Nonfarm Payrolls report expected to offer insights into a post-tariff economy. Meanwhile, critics argue that the tariffs were set without robust data, and with President Trump’s tariffs set to take effect on April 5 and 9, concerns persist over slowing US economic growth and potential delays in Federal Reserve rate cuts as inflation and employment impacts come under scrutiny.
In Asian market, the Japanese Yen surged as investors sought safe-haven assets amid global market turbulence triggered by US President Trump's sweeping 10% reciprocal tariffs, which have raised concerns over a potential reshaping of the global trading system and slowing economic growth. This risk-off sentiment has driven the USD/JPY pair to a three-week low, with safe-haven flows also pushing government bond yields lower. While traders expect the Federal Reserve to begin cutting rates in response to a tariff-driven US economic slowdown, there is growing anticipation that the Bank of Japan will raise rates further to combat rising inflation, thereby narrowing the rate differential between Japan and the US. These developments, coupled with mixed signals from US economic data, have kept market focus sharply on upcoming US economic releases and further trade-related policy moves.
The Euro gained significant ground against the US Dollar yesterday, pushing sharply higher as the Greenback faltered following the rollout of the Trump administration's controversial tariff packages. While underlying monetary policy divergence, with the European Central Bank potentially leaning towards easing sooner than the US Federal Reserve, previously capped the Euro, the immediate market focus has shifted squarely to the perceived negative economic impacts and global backlash against the US trade actions. Concerns about the tariffs potentially delaying Fed rate cuts and dampening US growth, evidenced by weaker-than-expected ISM Services data, are fuelling the move, overshadowing recent robust US jobs figures for now. Market sentiment has turned decidedly cautious on the US Dollar, though uncertainty remains high ahead of today's critical US Nonfarm Payrolls release.
Following its sharp ascent, EUR/USD settled near … after reaching an intraday high of …, which now acts as immediate resistance. The technical picture turned decisively bullish with the break above previous congestion, though indicators suggest caution is warranted in the near term. The Relative Strength Index (RSI_14) has pushed into overbought territory at 71.20, potentially signalling consolidation or a minor pullback. Initial support can be seen near the upper Bollinger Band around …. A more significant support zone lies near the 20-day Simple Moving Average at …, followed by the critical area around …-…, coinciding with the previous day's low and the 21-day Exponential Moving Average (…). While the strong momentum favours buyers, holding above these support levels will be crucial to sustain the newly established upward trajectory.
The US Dollar is facing significant downward pressure against the Japanese Yen, with USD/JPY experiencing a sharp decline in the latest trading session. The pair plunged dramatically, closing near 146.02 after reaching an intraday low around 145.18, indicating a decisive short-term trend reversal to bearish. This pronounced move suggests a substantial increase in risk aversion sweeping through markets, bolstering the safe-haven appeal of the Yen and overwhelming previous factors supporting the US Dollar. While the underlying broad interest rate differential between the US and Japan remains significant and could eventually offer some support, it is currently being overshadowed by the potent flight-to-safety flows favouring the Yen. Market sentiment has turned decidedly cautious and bearish for the currency pair in the immediate term.
From a technical standpoint, USD/JPY shattered key support levels during its recent tumble, closing well below important moving averages like the 20-day Simple Moving Average (SMA) near … and even breaching the lower Bollinger Band which sat around …. The Relative Strength Index (RSI), with the 14-day reading at 32.35, is approaching oversold conditions, highlighting the intensity of the sell-off, although this doesn't rule out further downside. The MACD histogram turning more negative confirms the strengthening bearish momentum. Immediate focus falls on the intraday low of … as critical support; a sustained break below this level would reinforce the strongly negative outlook. Should this support fail, the psychological … mark stands as the next potential floor. Any recovery attempts would likely encounter initial resistance near the breached lower Bollinger Band around …, followed by the … area.
