EUR/USD: Trump affects the dollar

Currency traders are increasingly questioning the future of the dollar as the hegemonic currency of global trade, in the midst of Trump's trade war against his "partners." On the Washington-Brussels front, threats and reprieves are coming thick and fast, as brutal as they are disconcerting, reflecting the impetuous occupant of the White House.

As a reminder, on Friday, Trump threatened the EU with tariffs of 50% starting 1 June, compared to 10% today. The US president justified this announcement by citing the difficulty of trade negotiations with Europe.

"It is very difficult to deal with the EU, which was created in the first place to take advantage of the United States from a trade perspective. (...) Our discussions are going nowhere. Under these conditions, I recommend imposing 50% tariffs on the EU, starting June 1st. There are no tariffs on products made in the United States," he wrote on his Truth Social platform.

Tariffs applied to European products currently average 12.5%, 2.5% corresponding to the level before Donald Trump's return to the White House, to which 10% have been added since the beginning of April and the announcement of his so-called "reciprocal" tariffs. The White House had initially planned to impose 20% tariffs on European products, before announcing a 90-day pause on tariffs above 10% to allow time for negotiations to be completed.

Trump yesterday pushed back his ultimatum, extending the trade negotiations deadline to 9 July. Ursula von der Leyen called the White House president to request more time to reach a constructive agreement. "Europe is ready to move negotiations forward quickly and decisively. To reach a good agreement, we will need time until 9 July," declared the highly unpopular president of the European Commission.

This decision allows "temporarily to ease the escalation of trade tensions," observes Naeem Aslam of Zaye Capital. The market specialist also believes that the statements by Donald Trump and Ursula von der Leyen support market optimism because they signal "a willingness to engage in serious negotiations."

"However, investor sentiment remains cautious due to the unpredictable nature of trade policies and the risk of future volatility," he adds.

In any case, the dollar remains on a slippery slope against the euro, whose role as a risk appetite indicator is less clear in these market circumstances.

We'll follow a speech by C. Lagarde, President of the ECB, at a conference at the Hertie School in Berlin. The agenda will expand significantly tomorrow with durable goods orders in the United States and the sacrosanct consumer confidence index (Conference Board), expected to rise slightly to 87.

Right now, the EUR/USD is trading at $1.1372.

KEY CHART ELEMENTS
The currency pair is currently passing the highly important chart test of the 50-day moving average (in orange). A breather is needed before setting new highs. That is, the formation of several support points on this trendline.

MEDIUM-TERM FORECAST
Based on the key chart factors we have mentioned, our medium-term view on the EUR/USD exchange rate is neutral.

We will maintain this neutral view as long as the EUR/USD exchange rate is positioned between the support at $1.1202 and the resistance at $1.1460.