Euro Could Update Its April Highs

The U.S. Dollar Index (DXY) fell by 0.41% to 98.92 points this week, while EURUSD climbed by 0.57% to 1.14110, with currency markets remaining heavily influenced by ongoing tariff developments. Initially, the delay of the 50% U.S. tariffs on EU imports until July 9 supported the Dollar, lifting it by as much as 0.6% during the first half of the week and pushing EURUSD down to 1.12920. This signaled a potential move toward the 1.12600 support level, which materialized after the U.S. Court of International Trade blocked Trump’s proposed tariff hikes. While markets initially welcomed the decision, sending EURUSD down further to 1.12100 on April 27, the mood quickly shifted as concerns over a deeper political crisis in the U.S. executive branch emerged — a development more damaging to the Dollar’s long-term outlook than tariffs themselves. This triggered a swift rebound in EURUSD back to 1.13700, and the week ended with only a symbolic 0.04% loss for the greenback.

However, the U.S. Appeals Court soon reinstated the tariffs, leading to renewed Dollar strength even as the PCE price index — the Fed’s preferred inflation gauge — dropped to 2.1% YoY from 2.3% in March. EURUSD fell again to 1.13130, appearing to settle into the familiar 1.12600–1.13600 range. But by the end of Friday, Trump reignited trade tensions by accusing China of violating trade agreements and vowing tighter restrictions on semiconductor exports. China responded sharply, escalating uncertainty. This renewed tension pushed EURUSD to 1.14530, its highest since April 22, effectively activating a fresh uptrend with a target range of 1.14500–1.15500 — a zone that has already been reached.

Despite the volatility, institutional investors have not made notable adjustments in the WisdomTree Bloomberg US Dollar Bullish Fund (USDU), signaling that broader market positioning remains skewed against the Dollar. If EURUSD holds above 1.14500, the pair could soon test 1.15500 and potentially surpass the April peak at 1.15730. A breakout above that level would indicate deeper structural weakness for the Dollar and open the way toward the 1.18000–1.19000 area.

The week ahead includes key macroeconomic events such as PMI data, the European Central Bank policy meeting, and the U.S. Nonfarm Payrolls report. These releases could inject fresh volatility into EURUSD, possibly driving it back toward 1.13500 or extending gains to 1.15500. Nevertheless, tariffs remain the overriding market driver. The White House has announced a phone call between President Trump and Chinese leader Xi Jinping, though the timing is uncertain. While current tensions seem less likely to erupt into a full-blown trade war, the unpredictability of U.S. policy continues to cast a shadow. A positive signal from the call could stabilize EURUSD near 1.13500, but the risk of further escalation keeps markets on edge.