Trade Policy Tensions Drive Eurozone Risks

At present, European policymakers appear more focused on drafting potential retaliatory measures rather than finalizing a trade pact, as the White House signals readiness to impose sweeping new sanctions. This risk backdrop is expected to weigh on the region’s economic outlook despite a recent tax reform in Germany, which drove federal revenues up by 7.3% year-over-year in June, reaching €98.45B. Over the first half of 2025, revenues climbed 8.1% to €447.57B. Still, July saw the German parliament approve a €46.0B stimulus package for 2025–2029, a sum that analysts believe will fall short of offsetting the potential losses facing Germany’s export-driven economy.

The US, meanwhile, is pushing for blanket tariffs above 10% on nearly all EU goods, exempting only select categories such as medical devices, pharmaceuticals, alcohol, and certain industrial equipment. In 2024, total bilateral trade amounted to €253.0B, but new tariffs could sharply reduce this figure. According to Bloomberg, existing and proposed tariffs already affect €380.0B worth of EU goods—approximately 70% of all EU exports to the US.

US Dollar Loses Momentum as Fed Rate Expectations Shift

The US dollar index (USDX) trades at 97.60, down from Friday’s peak, as traders anticipate the Federal Reserve may hold interest rates at current highs for longer in response to the ongoing trade standoff. Treasury Secretary Scott Bessent recently stated that the administration values the quality of any deal over its timing, hinting that further delays are likely if negotiations do not meet US standards. Bessent also emphasized that President Donald Trump retains the final say in any tariff negotiations.

Technical Picture: Key Levels and Scenarios

On the daily chart, EUR/USD is attempting to rebound from the lower boundary of its ascending channel (1.2100–1.1600), but upside momentum remains weak. Technical indicators have softened: the Alligator’s fast EMAs are positioned above the signal line but the range is narrowing, and the AO histogram is printing diminishing bars, suggesting waning bullish pressure.

  • Resistance levels: 1.1780, 1.2060
  • Support levels: 1.1570, 1.1280
EUR/USD: Technical setup and forecastEUR/USD: Technical setup and forecast

EUR/USD Trading Scenarios and Weekly Outlook

Short positions: Consider entering after a confirmed breakdown below 1.1570, with a target of 1.1280 and a stop-loss at 1.1640. Time horizon: 7+ days.

Long positions: Entries above 1.1780 open a path to 1.2060, with a stop-loss at 1.1700.

Timeframe Weekly
SELL STOP Entry: 1.1570, TP: 1.1280, SL: 1.1640
BUY STOP Entry: 1.1780, TP: 1.2060, SL: 1.1700
Key Levels 1.1280, 1.1570, 1.1780, 1.2060