EUR/USD: violent movements on the forex since Trump's tariff announcements

The USD, the benchmark currency for international trade for the past 80 years, lost its luster in the context of the intense trade war waged by Donald Trump, who announced on Wednesday tariff surcharges in addition to existing barriers: 35% for China, 20% for the European Union, 25% for Japan, and 25% for India, for example. And this with a minimum of 10% for all countries in the world, just to ensure no one is left out...

Not since the 1930s have tariff barriers been erected so high. A fortress-like rhetoric was developed by Dr. Trump in the White House gardens: "Our country has been plundered, devastated, and pillaged by enemy nations, as well as allies," he complained to justify this sudden increase in import taxes. And, according to him, to create the conditions for an industrial revival, thanks to the relocation of factories to the United States.

"The process of relocating production lines, when it is considered, will take time. In the meantime, some companies may be forced to adjust their prices, which could revive certain inflationary dynamics, in a context where the global economy remains fragile," warns Raphael Thuin, Director of Capital Markets Strategies at Tikehau Capital.

"Any response from the countries concerned will trigger an escalation of tariffs," threatened the subtle 47th President of the United States.

"Such a negative political catalyst for the global economy rightly requires a reassessment of the overall outlook. If the announced tariffs are implemented and remain at the planned levels, the risk of a contraction in the global economy is certainly higher. This does not mean that a recession is a certainty, but that the probability is now significantly higher." And this includes the United States, as evidenced by the sharp drop in the 10-year bond below 3.95%...

"The overall increase in customs duties is not only intended to reduce the trade deficit, but also and above all to reduce the US deficit, at the risk of triggering an economic slowdown or even an economic contraction for several months," warns Alexandre Baradez (IG France).

It is therefore in this turbulent context that currency traders will learn this Friday at 14:30 (EU time) of the monthly federal report on the health of non-agricultural employment. A stable unemployment rate of 4% of the labor force is expected, and job creations of around 138,000. No major surprises yesterday, with weekly jobless claims close to expectations, at around 219,000.

Right now, the EUR/USD is trading at $1.1032.

KEY CHART ELEMENTS
After clearly crossing $1.0608, the EUR/USD entered a long-range lateralization phase, which is now over. A bullish breakout is in full swing, even as the Bollinger Bands are diverging sharply.

MEDIUM-TERM FORECAST
In light of the key chart factors we have mentioned, our medium-term view is positive on the EUR/USD.

Our entry point is at $1.0989. The price target for our bullish scenario is $1.1673. To protect the invested capital, we recommend placing a protective stop loss at $1.0844.

The expected return on this forex strategy is 684 pips and the risk of loss is 145 pips.