- The market focuses on "Liberation Day" while EUR/USD corrects from prior demand.
- White House tariff announcements have led to market uncertainty and caution.
- Higher PCE inflation could strengthen the USD, pending labor market shifts.
- Looking for more actionable trade ideas to navigate the current market volatility? Subscribe here to unlock access to ProPicks AI winners.
The week begins with a continuation of a correction in EUR/USD, characterized by typical lower Monday volatility. The market seems to be anticipating Wednesday, when Donald Trump's "Liberation Day" is set to take place, which will see the implementation of broad-based tariffs that have been discussed since the President assumed office as well as during his election campaign.
However, Wednesday is unlikely to resolve this issue, as the topic of tariff wars is expected to persist. In the meantime, the main currency pair is experiencing movement within a local correction, somewhat influenced by last Friday's US PCE inflation data, which came in higher than forecast. From a macroeconomic perspective, the week's highlight will be the release of data on the US labor market.
Approaching a Key Moment in the Tariff War?
The frequent announcements from the White House about tariff policy are creating uncertainty, not only in financial markets but also among government officials, businesses, foreign partners, and US citizens. The upcoming "Liberation Day" is expected to attempt to clarify the situation and provide a clearer picture of the intended tariff structure. The financial markets, particularly stock indices and the US Dollar, are likely to react based on whether the announcements are more aggressive or lenient.
However, given the complexity and rapidly changing nature of the situation, a "wait and see" approach appears to be the most prudent strategy. It's important to consider the highly probable scenario that the President may not deliver significant new information that could markedly impact the stock or currency markets.
US PCE Inflation Remains Stubborn
Friday's data on PCE inflation dynamics served as the week's macroeconomic highlight. The results came in higher than expected, which theoretically should bolster the US dollar because of its implications for Federal Reserve policy.
If Donald Trump's speech on Wednesday is neutral, investors are likely to focus on the US labor market data released on Friday. As with previous months, market expectations are for stability without major fluctuations, so the impact on the market should be minimal if the data aligns with these forecasts.
Can the EUR/USD Correction Extend?
The main currency pair continues to be influenced by a strong demand surge that occurred at the beginning of the month, which has yet to be reversed. Currently, the exchange rate is experiencing a local correction with a limited range, as market participants await Wednesday's announcements related to "Liberation Day." If the downward movement extends, the next two support levels are around 1.0630 and 1.0530.
If there is an indication that the correction is ending, marked by a potential upward impulse, buyers should focus on the supply zone around the 1.1130 price area.
***
Be sure to check out InvestingPro to stay in sync with the market trend and what it means for your trading. Whether you’re a novice investor or a seasoned trader, leveraging InvestingPro can unlock a world of investment opportunities while minimizing risks amid the challenging market backdrop.
Subscribe now and instantly unlock access to several market-beating features, including:
- ProPicks AI: AI-selected stock winners with proven track record.
- InvestingPro Fair Value: Instantly find out if a stock is underpriced or overvalued.
- Advanced Stock Screener: Search for the best stocks based on hundreds of selected filters, and criteria.
- Top Ideas: See what stocks billionaire investors such as Warren Buffett, Michael Burry, and George Soros are buying.
Disclaimer: This article is written for informational purposes only. It is not intended to encourage the purchase of assets in any way, nor does it constitute a solicitation, offer, recommendation or suggestion to invest. I would like to remind you that all assets are evaluated from multiple perspectives and are highly risky, so any investment decision and the associated risk belongs to the investor. We also do not provide any investment advisory services.