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26 May 2025,06:00

Daily Market Analysis

Euro Strengthens Amid U.S.-EU Trade Developments

26 May 2025, 06:00

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Key Takeaways:

*U.S.-Euro trade tension de-escalating, bolstering euro.

*Both Stoxx 50 futures and Germany’s DAX futures rose before the market.

The euro rose to its highest level in May 2025 at the start of the week, a multi-week high against the U.S. dollar. This surge followed a significant development in U.S.-EU trade relations, with U.S. President Donald Trump and European Commission President Ursula von der Leyen agreeing to pause proposed U.S. tariffs on Eurozone goods and services until July 9, 2025. The tariffs, initially set at 50%, were postponed after a productive phone call on May 25, 2025, easing concerns about an imminent trade escalation.

The decision to delay tariffs reflects a de-escalation effort led by the Eurozone, with the United Kingdom and China also engaging in similar negotiations to address Trump’s broader tariff policies. The Eurozone’s proactive approach to securing a trade agreement has bolstered market confidence, contributing to the euro’s strength. European equity markets responded positively, with Euro Stoxx 50 futures gaining 1.4% and Germany’s DAX futures rising 1.3% on May 26, 2025.

The temporary reprieve from U.S. tariffs provides the Eurozone with a window to negotiate a favorable trade deal, supporting the euro’s near-term resilience. However, the dollar’s trajectory will likely depend on the outcome of the tax cut legislation and broader U.S. economic policies. Investors will continue to monitor U.S.-EU trade developments and their implications for currency markets.

Technical Analysis

EURUSD, H4

The euro extended its advance against the dollar, reaching its highest level in May and reinforcing a bullish outlook for the pair. The uptrend remains intact, with EUR/USD maintaining a higher-high price pattern after rebounding from key support near 1.1270 and decisively breaching the former resistance at 1.1340.

The rally now eyes the next resistance zone at 1.1465, a level that could trigger a near-term technical pullback. Nonetheless, momentum indicators remain constructive. The Relative Strength Index (RSI) is approaching overbought territory, while the MACD remains elevated and well above the zero line—both suggesting that bullish momentum is firmly in place.

As long as support holds above 1.1340, the pair appears poised for further upside. However, traders should remain alert for potential retracements as the pair nears key resistance levels.

Resistance Levels: 1.1468, 1.1625
Support Levels: 1.1340, 1.1200

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