EUR/USD afloat above key pivotal level ahead of US closing bell after Michigan tells concerning consumer story
- EUR/USD briefly heads back to 1.0900 on a flurry of headlines on Friday.
- The World Trade Organization could examine if US President Trump’s tariff policy is illegal.
- Markets have a sign of relief on the odds of a spending bill being passed, avoiding the US government shutdown, later this Friday.
The EUR/USD pair edges higher and recovers to 1.0900 at the time of writing on Friday, erasing its sluggish performance from earlier this week. The resurgence in the pair comes after two headlines emerged late Thursday. United States (US) Senate Democratic Leader Chuck Schumer announced that he plans to vote to keep the government open, backing the House-passed government funding measures and effectively ending the shutdown risk in the US.
Meanwhile, Canada initiated a dispute complaint at the World Trade Organization (WTO) and requested a look into US President Donald Trump’s tariff implementations, which might be illegal and contradict the WTO trade rules, Reuters reports. That would mean a huge setback for President Trump’s plans ahead of the reciprocal tariffs that will take effect in April.
Daily digest market movers: Michigan issues
- Gold, as a safe haven asset, has breached the $3,000 mark on Friday in a recession-feared-induced rally as traders are concerned about economic growth and the tariffs outlook, with reciprocal levies coming into effect in April.
- The University of Michigan has released its preliminary consumer expectations reading for March:
- The US Consumer Sentiment Index fell below 60 to 57.9. A big miss against expectations at 63.1 and from 64.7 in February.
- The US 5-year Consumer Inflation Expectation jumped to 3.9%, beating the 3.5% in the final February reading.
- Equities are attempting to brush off this week’s negative tone. All indices are up over 0.50% across Europe and the US on Friday.
- The CME Fedwatch Tool projects a 97.0% chance for the Federal Reserve (Fed) to keep interest rates unchanged in Wednesday’s upcoming decision. The chances of a rate cut at the May meeting stand at 32.8%, while they show a 78.5% probability of rates being lower than current levels in June.
- The US 10-year yield trades around 4.329%, off its near five-month low of 4.10% printed on March 4 and after hitting a five-day high on Thursday.
Technical Analysis: Supporting on crucial moment
Friday’s close is vital for the EUR/USD pair. From the looks on the technical charts, the pair has good odds of closing above a crucial ascending trend line (green in the chart below), which offered support on Thursday and Friday. A close above that line would mean that the 1.1000 psychological level could get in the cards heading into next week.
On the upside, 1.1000 is the key level to look out for. Once that level is breached, the pair enters the famous 1.1000-1.1500 range, where often it tends to stay for quite some time. Certainly, the 1.1200 big figure, which coincides with the highs of September and October last year, looks interesting for a brief test and possible breach higher.
On the downside, the ascending trend line at 1.0840 should still provide support for now. In case it breaks, the road is open to head into the 1.0700 region. The 200-day Simple Moving Average (SMA) around 1.0722 should be key for traders who want to buy the dip.
EUR/USD: Daily Chart
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
