FX.co ★ EUR/USD

The EUR/USD pair witnessed a dramatic surge on Tuesday, catapulting 1.4% higher, a substantial daily gain of 140 pips. This remarkable ascent was primarily fueled by a widespread sell-off of the US dollar, coupled with growing market speculation that US President Donald Trump would ultimately retract his tariff threats. The week's trading was dominated by trade war rhetoric, overshadowing the scheduled release of key economic data from both Europe and the United States. True to his characteristic pattern, President Trump appeared to be softening his stance on the imposed tariffs. Although the 25% tariffs on Canadian and Mexican imports officially took effect at midnight ET, the initial bout of risk aversion in early US trading was short-lived. Currency markets swiftly rebounded, reflecting a prevailing belief that the Trump administration would soon rescind or postpone the tariffs. This sentiment was further reinforced by statements from key members of Trump's team, notably Commerce Secretary Howard Lutnick, who hinted at a potential policy reversal during a Fox News appearance. Lutnick suggested that President Trump was likely to announce a revision to the tariff policy on Wednesday. In contrast to the volatile trade-related developments, economic data releases from Europe remained relatively subdued during midweek trading.

The central bank was expected to implement a quarter-point rate cut, lowering its benchmark rate to 2.65% from 2.9% and reducing the deposit facility rate to 2.5% from 2.75%. This move was intended to mitigate rising recession risks and stimulate the EU's diverse domestic economies. The euro's exceptional performance on Tuesday, marking its best single-day gain in over two years, propelled the currency to a 2.4% trough-to-trough increase over two days. The EUR/USD pair breached the 1.0600 level for the first time since December, setting its sights on a fresh five-month high. However, the pair encountered significant technical resistance as it approached the 200-day exponential moving average (EMA) at 1.0635. This crucial technical indicator often acts as a barrier to smooth trend continuation. Furthermore, technical oscillators indicated overbought conditions, suggesting that buying momentum might soon wane, potentially triggering a renewed wave of bearish activity. This confluence of technical factors underscored the potential for increased volatility and a possible reversal in the EUR/USD pair's upward trajectory.