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22 July 2025,07:57

Daily Market Analysis

Euro Under Pressure Ahead of Tariff Deadline, ECB Decision in Focus

22 July 2025, 07:57

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Key Takeaways:

*European officials are preparing countermeasures but remain engaged in diplomatic talks with Washington in hopes of averting a full-blown trade conflict.

*Investors are turning their attention to this week’s European Central Bank policy meeting, where rates are expected to remain unchanged. 

Market Summary:

The euro is under pressure as the August 1, 2025, U.S. tariff deadline looms, with President Trump’s threat of a 30% tariff on EU imports fueling market uncertainty. EU officials are actively discussing countermeasures, including potential tariffs on €21-72 billion of U.S. goods, while diplomatic efforts continue to secure a last-minute deal. A framework agreement with a lower 10% tariff baseline remains a possibility, though Trump’s push for 15-20% tariffs has hardened negotiations.

This week’s European Central Bank (ECB) policy meeting adds another layer of focus. The ECB is expected to maintain current interest rates, supported by stable inflation and a robust labor market. However, investors will scrutinize ECB President Christine Lagarde’s comments for hints on future rate decisions or responses to trade-related economic risks.

A constructive EU-US trade outcome could bolster the euro, potentially stabilizing markets and reinforcing its resilience. Conversely, failure to reach a deal risks further euro depreciation and heightened volatility, especially if retaliatory tariffs escalate. The Stoxx Europe 600’s recent dip reflects these concerns, though markets have shown some recovery as talks progress.

Technical Analysis

EURUSD, H4

The EUR/USD pair, which had previously been trading within a defined downtrend channel—marked by a series of lower highs and lower lows—has staged a notable breakout. The pair rebounded by nearly 0.7% from its recent lows following the breakout, pointing to a potential bullish trend reversal.

Momentum indicators are reinforcing the shift in sentiment. The Relative Strength Index (RSI) has climbed from near oversold territory and is now trading above the midpoint, while the MACD has broken above the zero line, signaling the emergence of fresh upward momentum.

If bullish traction continues, the pair may target the next key resistance level, validating the breakout and further strengthening the case for a reversal.

Resistance Levels: 1.1750, 1.1870

Support Levels: 1.1620, 1.1470

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