- The EUR/USD outlook shows a bearish sentiment shift amid escalating trade tensions.
- The euro extended its retreat from the 5-month peak hit earlier in the week.
- The US threatened a 200% tariff on alcohol imports from the Eurozone.
The EUR/USD outlook shows a bearish sentiment shift amid escalating trade tensions between the US and the Eurozone. At the same time, hopes of a ceasefire deal to end the Ukraine war dimmed slightly after Russia called for changes to the US proposal.
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The euro dropped on Friday, extending its retreat from the 5-month peak hit earlier in the week. The steel and aluminum tariff that took effect on Wednesday has ignited a growing trade conflict with the US and the Eurozone, threatening tariffs on other imports like alcohol.
Wednesday’s tariff prompted the Eurozone to threaten tariffs on American Whiskey. The US responded by threatening a 200% tariff on alcohol imports from the Eurozone, including wine. Such an outcome would hurt both economies by reducing trade.
The ongoing trade wars between the US and its trading partners have pushed investors to safe-haven assets. There is a growing panic that the US economy will tip into a recession. Moreover, the outlook for the global economy is clouded.
Elsewhere, data on Thursday revealed softer-than-expected US wholesale inflation. This followed a downbeat consumer inflation report, increasing expectations for Fed rate cuts. However, with tariff uncertainty, the US Central Bank might remain cautious.
EUR/USD key events today
- Preliminary UoM consumer sentiment
- Preliminary UoM inflation expectations
EUR/USD technical outlook: SMA break clears path to 1.0701 support


On the technical side, the EUR/USD price has broken below the 30-SMA, indicating a bearish shift in sentiment. At the same time, the RSI has broken below 50, indicating stronger bearish momentum. This shift follows a bearish RSI divergence that pointed to weak bullish momentum. As a result, the previous uptrend failed to go beyond the 1.0901 resistance level.
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The SMA break has cleared the path for EUR/USD to retest the 1.0701 support level. Despite the sentiment shift, bulls might still return to the market. However, the price might need a deeper correction before this happens.
If bulls resume the uptrend, the price will likely reach the 1.1001 resistance. On the other hand, if bears take over, the price will start making lower highs and lows, indicating a new bearish trend.
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