EUR/USD extends gains as EU suspends retaliatory tariffs on US goods

• EUR/USD remains firm around 1.1350 in Friday's early European session.
• The EU has paused its retaliatory 25% tariffs on US goods for 90 days due to Trump's tariff suspension.
• ECB is anticipated to cut the deposit rate at its April meeting next week amid downside risks to the economy.

The EUR/USD pair remains firm near 1.1350 after retreating from 1.1385, the highest since February 2022, during the early European trading hours on Friday. The Euro (EUR) edges higher against the US Dollar (USD) as the European Union (EU) announced a 90-day pause on countermeasures against the United States (US), a day after US President Donald Trump hit a pause on previously announced tariffs for dozens of countries.

Nonetheless, the rising expectation of more interest rate cuts from the European Central Bank (ECB) might exert some selling pressure on the shared currency. The ECB has cut the key deposit rate six times since June 2024 and is expected to cut again next week, according to 61 of 71 economists in the April 7-9 Reuters poll. "We expect the ECB to deliver a 25bp rate cut at the April meeting," noted economists at Morgan Stanley.

Investors brace for the US Producer Price Index (PPI) for March and the advanced Michigan Consumer Sentiment report, which are due later on Friday. Also, Federal Reserve (Fed) Bank of St. Louis President Alberto Musalem and Fed Bank of New York President John Williams are scheduled to speak. If the reports show a stronger-than-expected outcome, this could lift the Greenback and cap the upside for EUR/USD.

Technical Analysis: EUR/USD maintains a bearish tone amid the overbought condition

EUR/USD trades stronger on the day. The major pair keeps the bullish vibe on the daily timeframe, with the price holding above the key 100-day Exponential Moving Averages (EMA). However, the 14-day Relative Strength Index (RSI) stands near 75.50, indicating the overbought RSI condition. This suggests that a consolidation or retracement cannot be ruled out before positioning for any near-term EUR/USD appreciation

The immediate resistance level for EUR/USD emerges at 1.1385, the high of February 17, 2022, en route to the 1.1400 psychological level.

On the flip side, the initial support level for the major pair is located at 1.1146, the high of April 3. A breach of this level could expose 1.1088, the low of April 8. Further south, the next contention level to watch is 1.0780, the low of April 2.