Insights 
VT 
Key Points:
- EUR/USD fell 1.3% in the prior session, its sharpest drop in two months, and now trades at $1.1594.
- France and Germany criticise the trade deal with the US, citing severe economic risks and export damage.
The euro came under renewed pressure this week, failing to recover meaningfully from Monday’s sharp 1.3% fall—its largest one-day drop in over two months. The EUR/USD pair last traded at $1.1594, up only 0.07%, as traders began to reassess the broader consequences of the newly signed US-EU trade deal.
Politically, the deal sparked backlash across the bloc. France called the agreement a “dark day” for Europe, while German Chancellor Friedrich Merz warned that the terms and a 15% baseline tariff on EU exports would bring “significant” damage to German exporters.
As European bond yields fell, the euro lost further ground against the dollar, boosting the Dollar Index (USDX) by 1% overnight to 98.67. The greenback’s strength also pushed sterling to a two-month low at $1.3349 and lifted USD/JPY to 148.49.
Beyond the eurozone, the US dollar’s dominance was further supported by signs of renewed engagement with global allies. Macquarie’s Thierry Wizman suggested that the dollar’s rally reflects more than trade gains—it signals a broader re-engagement strategy by the US government.
Meanwhile, President Trump hinted that trading partners who do not reach separate deals may face tariffs ranging from 15% to 20%, surpassing the original 10% base level set in April.
This keeps global trade uncertainty elevated, especially as the US and China continue their dialogue. Top officials met in Stockholm this week to extend their truce by another three months.
Rate decisions from the Fed and BOJ are also on the radar this week. Neither central bank is expected to change interest rates, but traders are watching for any forward guidance that could shape policy expectations moving into Q3.
Technical Analysis
EUR/USD has been in a sustained downtrend since peaking near 1.1770, with lower highs and lower lows forming consistently over the past two sessions. The moving averages remain steeply sloped downward, confirming strong bearish momentum. Price is holding just below the 5- and 10-period MAs, reinforcing ongoing selling pressure.
Picture: EUR/USD breaks below key support after a relentless downtrend from 1.1770, as seen on the VT Markets app
While the MACD remains negative, the histogram bars are beginning to shorten, which could suggest a minor slowdown in downside momentum.
Still, there’s no bullish crossover yet. If 1.1580 fails to hold, the next level to watch lies near 1.1530. A break above 1.1620 would be needed to challenge the descending trendline and consider a shift in bias.
Cautious Forecast
Unless EUR/USD regains the 1.1620 zone with conviction, bearish pressure may deepen toward 1.1550. A temporary floor could form here, but sentiment remains fragile.
Traders should watch closely for Fed guidance and ECB reactions to the economic fallout from the trade deal.
