The EUR/USD pair dropped to 1.0778 on Thursday, staging a modest correction but remaining under pressure amid deteriorating market sentiment.
Key drivers weighing on EUR/USD
The latest sell-off is driven by heightened trade war fears. On Wednesday, US President Donald Trump announced a 25% tariff on all imported cars and light trucks, set to take effect on 2 April. The move, seen as retaliation against foreign tariffs on US goods, escalates trade tensions. Markets view this as a major risk, with potential consequences including slower US economic growth and higher inflation.
Adding to the bearish sentiment, fresh economic data revealed:
- US consumer confidence plunged to a four-year low
- Core capital goods orders (excluding defence and aircraft) declined, breaking a three-month growth streak – a worrying sign for business investment
Investors now await Friday’s Core PCE Price Index – the Fed’s preferred inflation gauge – and the revised US Q4 2024 GDP estimate, which could set near-term market direction.
Technical analysis of EUR/USD
On the H4 chart of EUR/USD, the market completed a downward move to 1.0733. A correction towards 1.0855 is likely today. Once this correction ends, a new decline towards 1.0707 may begin. Technically, this scenario is confirmed by the MACD indicator: its signal line is below zero and pointing downward to new lows.
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On the H1 EUR/USD chart, the market has formed a consolidation range around the level of 1.0826 before breaking lower to 1.0733. This move has nearly met its local downside target. Today, a corrective pullback towards 1.0826 (testing from below) is possible. Once this correction ends, a renewed decline towards 1.0700 could unfold. This move is viewed as the first wave of a broader downtrend. If this level is reached, another bounce towards 1.0826 cannot be ruled out. Technically, this scenario is confirmed by the Stochastic oscillator: its signal line is above 80 and preparing to drop towards 20.
Conclusion
With trade war risks weighing on sentiment and technical indicators pointing to continued downside, EUR/USD could test 1.0700 in the coming sessions. Traders should monitor US inflation data and GDP revisions for confirmation of the next major move.
