Euro falls against dollar, with Trump's tariffs seen as slowing European growth

The FX market is now closely watching technical setups in EURUSD and USDCAD, both of which are approaching critical inflection points. The EURUSD pair has been on a sharp decline, now testing a long-standing descending channel on the 4-hour chart. This zone—around the 1.155 area—has previously acted as reliable support.

The U.S. dollar was extending its bounce versus the euro for a second day on Tuesday, finding support on what currency strategists said appeared to be substantial short covering versus the euro following the U.

“Further euro strength is likely to be self-defeating,” said Valentin Marinov, a currency strategist at Crédit Agricole, a French bank. Exports were already likely to weaken and become a drag on the eurozone economy because of U.S. tariffs and European government policies that would encourage more imports.

The Euro has accelerated its downward momentum vs. the US Dollar (USD) on Monday, sending EUR/USD south of the 1.1600 support to hit new two-week troughs. The pullback came as the Greenback found its footing again, nudging the Dollar Index (DXY) well north of the 98.00 hurdle.

The US and the EU coming together for a trade deal has been a boost for the US dollar to kick off the week, as we see the USD oversold condition start to get questions asked of it.

The pound briefly hit a two-year low versus the euro on Monday, before rebounding, and dipped on the dollar, though its moves were largely a function of those elsewhere as investors digested the announcement of an EU-U.