The EUR/USD currency pair traded more calmly on Tuesday than on Monday. The US dollar managed to avoid another fall, but it's too early to celebrate. The greenback can collapse anytime, and plenty of risk factors are currently in play. Of course, they all revolve around the trade war between the US and the rest of the world.
The first factor – is Trump's acknowledgment of failed trade deal negotiations with most countries. We've already mentioned that the trade war won't benefit anyone — not even the US, despite Trump's efforts to convince everyone otherwise. Many experts are now forecasting a US recession, potentially as early as 2025. The market agrees with this outlook, judging by the continued depreciation of the US dollar. We also pointed out that not all countries are willing to meet Trump's ultimatums. Some may sign a trade deal, but trading with the US on Trump's terms will simply be unprofitable for many nations. Therefore, such deals may end up being meaningless.
The second factor is the new trade war escalation. The pace at which Trump has increased tariffs on virtually everything in recent months suggests we are not yet seeing the final version of the US import duties. If any country refuses a deal or introduces retaliatory tariffs, the White House could respond by increasing tariffs even more.
The third factor is China and the EU. It's no secret that trade relations with the European Union and China are the biggest concerns for experts and traders alike, as they have the greatest impact on the US and global economies. So, even if Trump signs deals with all countries on his "blacklist," excluding China and the EU, that won't change the state of the US economy or its prospects or favorably influence the dollar's exchange rate.
Let's recall that there are no official negotiations with China now. According to rumors, Trump wants Chinese President Xi Jinping to call him and perhaps beg for a trade agreement personally. We don't know how true that is, but we do know China's official stance: there will be no concessions to Washington unless it's about fair and honest trade. Indeed, some form of deal between the US and China is possible. China may even agree to limited concessions to gain larger benefits. But in that case, the US would also have to compromise. That's the essence of negotiations. However, Donald Trump has no intention of making concessions. He intends to pressure and squeeze China, seeing it as the main competitor to the United States. Unsurprisingly, the US president is demanding that sanctioned countries reduce their trade with China...
The average volatility of the EUR/USD pair over the last five trading days, as of April 23, stands at 107 pips, which is considered "high." We expect the pair to move between the levels of 1.1347 and 1.1561 on Wednesday. The long-term regression channel is directed upward, indicating a short-term bullish trend. The CCI indicator has entered the overbought zone twice, with the correction being weak and already completed. A third entry into overbought territory again points to a possible correction.
Nearest Support Levels:
S1 – 1.1475
S2 – 1.1230
S3 – 1.0986
Nearest Resistance Levels:
R1 – 1.1719
R2 – 1.1963
R3 – 1.2207
Trading Recommendations:
The EUR/USD pair maintains a bullish trend. For several months, we've continuously said that we expect the euro to fall in the medium term, and nothing has changed. The dollar still has no medium-term reasons to decline — except Trump. However, that one reason alone continues to drag the dollar deeper into the abyss. What's more, it's now completely unclear what consequences this may have for the economy. It's quite possible that by the time Trump stops escalating the trade war, the US economy will be in dire condition, and thus, no dollar recovery will be possible. If you're trading based on "pure" technicals or "the Trump factor," long positions can be considered if the price is above the moving average, with targets at 1.1561 and 1.1719.
Explanation of Illustrations:
Linear Regression Channels help determine the current trend. If both channels are aligned, it indicates a strong trend.
Moving Average Line (settings: 20,0, smoothed) defines the short-term trend and guides the trading direction.
Murray Levels act as target levels for movements and corrections.
Volatility Levels (red lines) represent the likely price range for the pair over the next 24 hours based on current volatility readings.
CCI Indicator: If it enters the oversold region (below -250) or overbought region (above +250), it signals an impending trend reversal in the opposite direction.
