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EUR/USD Loses Ground in the Run-Up to Eurozone Inflation Data as US Dollar Experiences Technical Correction

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  • June 3, 2025
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EUR/USD is losing ground as the US Dollar recovers on technical basis even as the US manufacturing data remains soft. Market players remain focused on the release of forthcoming Eurozone HICP inflation data, which may set the direction for ECB policy. In the meantime, trade tensions have flared again after Donald Trump suggested doubling steel and aluminium tariffs, which elicited a sharp retort from the European Union. With increasingly worrying fears about global trade and economic deceleration, investors stay on guard ahead of major US labor market releases, which may further influence currency action. KEY LOOKOUTS • The markets are looking forward to the publication of the Harmonized Index of Consumer Prices (HICP) that will provide a glimpse into the European Central Bank (ECB) policy direction. • US Dollar recovers on technical correction, even as a softer ISM Manufacturing PMI reading hints at possible stagflation pressures in the US economy. • Trump’s suggestion that tariffs on steel and aluminium be doubled in size stokes concerns about intensifying trade tensions, prompting denials from the European Union and putting at risk current negotiations. • Investors look to the next US JOLTS report for new labour market indications that will affect USD strength and inform near-term EUR/USD action. EUR/USD is lower around 1.1420 in the Asian session on Tuesday, as the US Dollar experiences a technical correction in spite of continued fears of economic slowdown. The pair fell after its robust performance in the last session, having appreciated more than 0.50%. Traders now await the forthcoming Eurozone Harmonized Index of Consumer Prices (HICP) inflation to see how it affects European Central Bank policy expectations. On the other hand, US manufacturing activity continues to shrink as the ISM Manufacturing PMI fell to 48.5 in May, a third month of falling, adding to the market angst. Adding to market nerves, President Donald Trump’s plan to double steel and aluminium tariffs has heightened trade tensions concerns as the European Union threatened possible countermeasures that could threaten bilateral talks. EUR/USD drifts lower around 1.1420 on technical bounce for US Dollar, down on poor US manufacturing data. Market sentiment takes a hit with rising trade tensions following Trump’s tariff increase. •  EUR/USD declines around 1.1420 after recording more than 0.50% on the last session, pummeled by a rebounding US Dollar. •  US Dollar bounces on technical correction even as weaker-than-anticipated ISM Manufacturing PMI data drops to 48.5 in May. •  European Central Bank’s next interest rate move could be influenced by eurozone HICP inflation data. •  Trade tensions escalate as Donald Trump lays out a plan to double US tariffs on steel and aluminium imports, putting pressure on global markets. •   European Union reacts forcefully, threatening Trump’s tariff increase can derail current trade talks and trigger retaliatory measures. •  US economic worries continue, as stagflationary signs rise as manufacturing production falls for a third consecutive month. •   Traders await US JOLTS Job Openings report later today for additional information on labor market strength and possible USD effect. The foreign exchange market is paying close attention to events in the Eurozone and the United States as significant economic and political events unfold. Traders are looking to the publication of the Eurozone’s Harmonized Index of Consumer Prices (HICP), an important inflation reading that could have implications for European Central Bank policy later on. Meanwhile, the overall market mood is being influenced by the revived trade tensions following former US President Donald Trump’s decision to double import tariffs on steel and aluminum, which was met with strong criticism from the European Union. The EU has threatened that such a move could dash hopes of pending trade negotiations and prompt retaliatory actions, which casts a cloud of uncertainty over the global economic outlook. EUR/USD DAILY PRICE CHART CHART SOURCE: TradingView At the same time, recent US data keeps highlighting issues in manufacturing. The most recent ISM Manufacturing PMI report showed a third month of slowing down, which indicates stress on the industrial part of the economy. In spite of that, the US Dollar has still been able to recover some lost ground as a result of market positioning and technical considerations. In the near future, focus will be on the US JOLTS Job Openings report, which can offer additional insight into the health of the US labor market and inform expectations for future economic trends. TECHNICAL ANALYSIS EUR/USD is immediately met with resistance around the 1.1450 level, an area that corresponds with recent session highs and could limit further upside if bullish pressure diminishes. To the downside, initial support is at 1.1380, where buyers previously intervened, then even firmer support at the 1.1350 handle, which aligns with the 50-day moving average. Momentum indicators such as the Relative Strength Index (RSI) are in the neutral range, predicting a possible consolidation phase unless a clear breakthrough or breakdown happens. Traders will be looking for a sustained breakout above resistance or below strong support to establish the next direction of travel. FORECAST The Euro initially responded well, with EUR/USD increasing more than 0.50% during the last session as investor sentiment improved temporarily. Support from positive momentum came courtesy of expectations regarding the soon-to-be-released Eurozone HICP inflation data that can provide some indication of the European Central Bank’s next policy decision. Moreover, worries of decelerating US economic numbers, such as softer manufacturing data, helped to encourage a more bearish sentiment regarding the US Dollar. These sentiments assisted the Euro to rally during the initial trading session, aided by optimism and positioning within markets. The advances, however, were temporary as the US Dollar recovered owing to a technical reversal, pushing EUR/USD down around the 1.1420 level. The Dollar’s rebound occurred notwithstanding the continued uncertainty over economic softness, such as a third straight monthly drop in US factory output. To add to the bear pressure on the Euro, news of former US President Donald Trump’s plan to raise tariffs on steel and aluminium again fueled trade war fears. Further hammering the sentiment was the European Union’s threat

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AUD/USD Currencies

Australian Dollar Retreats In the Face of US Dollar Recovery and Changing Global Economic Patterns

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  • May 27, 2025
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Australian Dollar (AUD) declined below the 0.6500 level on Tuesday after retreating from a six-month peak, while the US Dollar (USD) recovered losses in recent days as Treasury yields declined for the third day running. Improved Chinese industrial profit growth and weakening US-EU trade tensions are giving conflicting signals for the AUD/USD, but concerns about US fiscal deficits and debt levels remain to underpin the Greenback. The recent Australian Reserve Bank rate cut and outlook for additional monetary accommodation may cap AUD’s gains, but technical indicators are favoring optimistic caution for a possible rebound if major resistance levels can be broken. Traders continue to be alert to future US economic news and geopolitical events that affect trade relations, which will tend to have the greatest influence on currency movements in the near future. KEY LOOKOUTS • Look for future releases such as Durable Goods Orders, the Dallas Fed Manufacturing Index, and Consumer Confidence, which may affect the strength of the USD. • Additional Reserve Bank of Australia interest rate cuts may cap AUD advances and burden the currency’s medium-term prospects. • Evolving trade relations—especially the US-China truce and postponed EU tariff deadlines—could impact global risk sentiment and support the AUD. • Monitor resistance at 0.6537 and support at the nine-day EMA (0.6456). A breakout above resistance could target 0.6687, while a drop below support may trigger deeper declines. Traders should closely monitor several key factors influencing the AUD/USD pair in the near term. Future US economic releases, such as Durable Goods Orders and Consumer Confidence data, may influence the recovery path of the US Dollar. In the meantime, chances for additional Reserve Bank of Australia interest rate cuts may cap the Australian Dollar’s upside potential. Developments in global trade—i.e., the US-China ceasefire and postponed US-EU tariff announcement—may influence risk perception and indirectly help prop up the AUD given the robust trade linkages between Australia and China. Moreover, technical levels are still important, and the pair should break above 0.6537 in order to continue its bullish trend, while a fall below the nine-day EMA at 0.6456 could open further declines. Traders need to monitor major US economic indicators and additional Reserve Bank of Australia rate decisions that can influence AUD/USD action. Global trade tensions and China’s economic performance continue to be key drivers given Australia’s high trade dependencies. Technically, breaking above 0.6537 would confirm additional advances, with support around 0.6456. • The Australian dollar fell from a six-month high of 0.6537, below the psychological 0.6500 barrier. • The USD recovered as Treasury yields fell for the third consecutive day, giving support to the Greenback. • April reported a 3% YoY increase in China’s industrial profits, which indicated economic strength and aided AUD sentiment. • The Reserve Bank of Australia just cut rates by 25 bps and signaled additional easing if the economic outlook deteriorates. • President Trump pushed out the EU tariff deadline, which improved risk sentiment and provided indirect support for the AUD. • Increasing deficit forecasts and Moody’s credit rating reduction are exerting long-term pressure on the USD. • Resistance is at 0.6537 and the support is at the 9-day EMA (0.6456); a break either way may dictate the next direction. The Australian Dollar continues to be under pressure due to the overall global economic changes and continued policy updates. In spite of a recent lift from China’s better industrial profits—up 3% year-on-year in April—the AUD has failed to continue being positive. China’s economic performance is of great influence over the Australian Dollar because of their strong trade relationship, especially in commodity and manufacturing industries. Also, relaxing US-European Union trade tensions, such as President Trump postponing new tariffs, have favored general market sentiment, indirectly helping risk-sensitive currencies such as the AUD. AUD/USD DAILY PRICE CHART CHART SOURCE: TradingView In the meantime, US economy concerns continue to capture market attention. The US Dollar has provided signs of strength in the face of increasing fiscal concerns, such as a projected $3.8 billion deficit increase from proposed legislation and Moody’s reduction of the US credit rating. Indications from Federal Reserve officials indicate doubt regarding future policy actions, especially with regard to increasing tariffs and fiscal uncertainty. As markets absorb these updates, traders are also monitoring Australia-China relations and any geopolitical changes that may influence trade dynamics in the future. TECHNICAL ANALYSIS AUD/USD pair holds a mildly bullish inclination as it trades close to the 0.6500 mark, buoyed by its stand above the nine-day Exponential Moving Average (EMA). The Relative Strength Index (RSI) is still above the neutral 50 level, showing continued buying interest. A persistent break above the latest high of 0.6537 would strengthen the momentum to the upside and leave the way open for a test of higher levels of resistance. On the other hand, if the pair drops below the nine-day EMA at 0.6456, it may indicate diminishing bullish strength and leave the pair vulnerable to more aggressive correction. Traders should watch these levels for near-term guidance. FORECAST The Australian Dollar may regain its strength against the US Dollar if there is further improvement in global risk appetite, particularly with declining trade tensions between the US and EU and China’s steady industrial growth. Favorable developments in China’s economy, especially those in high-tech and equipment industries, may further push the AUD higher owing to Australia’s robust trade relationships. Also, if US economic statistics fail to meet expectations or Federal Reserve officials start to signal rate cuts in the coming weeks, the Greenback may weaken, creating space for the AUD/USD pair to advance. Another bout of buying above 0.6537 might test further gains towards the 0.6600–0.6687 levels in the near term. On the downside, the Australian Dollar remains vulnerable to further losses if the Reserve Bank of Australia proceeds with additional rate cuts or if Australia-China relations worsen, especially amid rising diplomatic tensions like the Darwin Port lease issue. Persistent concerns over the US fiscal deficit and high bond yields may continue to offer support to the USD. A heavy fall

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