EUR/USD rallies hard as markets bet on tariff pivot

• EUR/USD rose 1.4% on Tuesday, cracking the 1.0600 level.
• Data was of little consequence on Tuesday as markets focus on tariffs.
• ECB rate call in the pipe for Thursday, US NFP jobs data due on Friday.

EUR/USD pinned the gas pedal on Tuesday, surging 1.4% and climbing 140 pips in a single session as markets sell off the US Dollar and bet that US President Donald Trump will find a reason to walk back his own tariff threats. Key data on both the European and US side are due later this week, but trade war rhetoric is ruling the roost for the midweek.

Tariffs, no tariffs

Staying true to form, US President Donald Trump is already seeding a pivot on his own tariff threats. A stiff tariff package of 25% on imported goods from Canada and Mexico went into effect at midnight EST. However, despite a brief spat of risk aversion early in the US session, currency markets quickly recovered their feet and bet big on another tariff policy reversal or delay from the Trump administration. Key personnel in the Trump team, specifically Commerce Secretary Howard Lutnick, admitted to Fox News viewers that a pivot on this week's tariffs may already be in the works, to be announced by President Trump on Wednesday.

Economic data on the European side is a lean offering during the midweek market session as Fiber traders knuckle down for the one-two punch of the European Central Bank's (ECB) March rate call on Thursday, as well as the latest iteration of US Nonfarm Payrolls (NFP) jobs figures, slated for Friday. This week's NFP print will likely draw even more attention than usual as investors start to keep an eye out for any signs of economic weakness as consumers and businesses begin to crack under the weight of continued threats of a global trade war by President Trump.

Wednesday brings US ADP Employment change figures, as well as an ISM Services Purchasing Managers Index (PMI) survey results update. ADP jobs counts are expected to ease slightly to 140K from 183K, while the ISM Services PMI is forecast to tick down slightly to 52.6 from 52.8.

The ECB is broadly expected to trim interest rates by another quarter of a percent on Thursday, bringing the main reference rate down to 2.65% from 2.9%, and the Deposit Facility Rate is forecast to fall by a matching amount to 2.5% from 2.75% as the ECB tries to get out ahead of growing recession risks and tries to bolster the EU's wide and varied domestic economy.

EUR/USD price forecast

The Euro put in its best single-day performance in over two years on Tuesday, climbing nearly 1.4% and bringing its two-day bull run to an impressive 2.4% bottom-to-top. EUR/USD broke through the 1.0600 handle for the first time since last December, and is on pace to reach new five-month highs as long as Fiber bulls are able to keep hitting the buy button.

However, significant technical resistance is beginning to mount. The 200-day Exponential Moving Average (EMA) lies in wait near 1.0635, and has a habit of making a mess of what would otherwise be smooth trends.

Technical oscillators are also caught in overbought territory, implying buyers could run out of gas quickly and spark a fresh round of bearish bidding.

EUR/USD daily chart