EUR/USD slumps as Trump sparks fresh trade-war fears

• EUR/USD drops 0.44% to 1.1718, hitting six-day low of 1.1686 before modest rebound.
• Trump imposes 25%-40% tariffs on South Korea, Japan, Malaysia and others.
• Reuters: EU exempt from latest tariff wave, aiding EUR/USD recovery.
• German Industrial Production posts slight improvement in May.

EUR/USD tumbled on Monday during the North American session amid a risk-off impulse, courtesy of an escalation in the trade war, as US President Donald Trump began sending letters with tariffs imposed on some countries. This boosted the US Dollar to the detriment of the shared currency, which trades at 1.1718, down 0.44%.

Trump announced tariffs of 25% on all Korean and Japanese products imported to the US. Additionally, he applied duties to Malaysia, Kazakhstan, Myanmar, Laos, and South Africa within the range of 25% to 40%. Once the headlines were known, the EUR/USD dipped to its lowest level in six days at 1.1686.

However, Reuters revealed that the European Union (EU) would not be receiving a letter setting out higher tariffs from the US, which boosted the EUR/USD back above 1.1700 to its current exchange rate.

Meanwhile, the US economic docket remains absent on Monday and Tuesday. Traders are eyeing the release of June's Federal Open Market Committee (FOMC) Minutes. In the EU, German Industrial Production figures for May showed a slight improvement, as revealed by the Federal Statistics Office of Germany.

Daily digest market movers: The Dollar strengthens on risk-off mood; Euro tumbles

• The strength of the Greenback pressures the EUR/USD. The US Dollar Index (DXY), which tracks the buck's value against a basket of six currencies, is up 0.56% at 97.53.
• The White House has sent a total of 7 letters to the following countries, with its corresponding tariffs: South Korea (25%), Japan (25%), Malaysia (25%), Kazakhstan (25%), Laos (40%), South Africa (30%) and Myanmar (40%). These levies will be applied on August 1.
• US President Donald Trump stated that the rates did not include "sectoral-specific tariffs." Meanwhile, the White House announced that the 90-day deadline set on April 2's Liberation Day has been extended to August 1.
• The EU stated that there has been some progress on a framework trade deal with the United States (US), according to EU spokesman Olof Gill. He indicated that Ursula Von der Leyen held a call with Trump on Sunday, saying that "they had a good exchange."
• German Industrial Production in May rose more than expected, increased 1.2% MoM, exceeding forecasts of 0%. On a yearly basis, it improved from April's 1.6% plunge to 1% expansion. Franziska Palmas, senior Europe economist at Capital Economics, said, "The better-than-expected German industrial production figures for May are partly due to continued tariff front-running in the pharmaceuticals sector."

Euro technical outlook: EUR/USD drops, bears eye 1.1700

The EUR/USD edges lower on the daily chart, threatening to print a new seven-day low below the June 27 cycle low of 1.1680, which could clear the path to challenge 1.1650 and the 20-day Simple Moving Average (SMA) at 1.1622. Further downside is seen at 1.1600.

The Relative Strength Index (RSI) suggests that buyers are losing momentum as the RSI is falling steeply toward its neutral level.

Conversely, if EUR/USD stays above 1.1700, the next key resistance would be 1.1750, the 1.1800 mark, and the year-to-date (YTD) high of 1.1829.