Safe-Haven Rush Batters U.S. Dollar Despite Tariff Rollback
Precious metals shine as EUR/USD breaks higher ahead of Fed decision
The US Dollar finished last week on the ropes, after being pummelled for the entire weekly session as investors retreated to safe-haven assets. Geopolitical tensions, led by U.S President Trump’s pursuit of Greenland and tariff threats on Europe, triggered a lack of confidence in the dollar.
On Wednesday, Trump rolled back his tariff threats and posted on Truth Social, saying that a framework is in place for “a future deal with respect to Greenland and, in fact, the entire Arctic Region”. Earlier, he also ruled out any action to take Greenland by force.
Despite this de-escalation, investors flocked away from the US Dollar and moved towards safer assets such as precious metals. Gold ended the week just $2 shy of $5,000, while Silver cleared the $100 psychological level by $3.
Economic Calendar Highlights
On Tuesday, President Trump will speak about the economy in Iowa. The exact time is not set at the time of writing, but given the recent geopolitical situation, we can expect volatility if Trump touches on any of the subjects that have been making headlines lately.
The Federal Reserve will announce the interest rate on Wednesday at 7:00 pm GMT, but no change is expected from the current 3.75%. The rate announcement is already priced in, but the press conference that follows at 7:30 pm GMT will likely create more chart movement, especially if Fed Chair Powell gives us any clues regarding the next rate cut.
The U.S. Producer Price Index (PPI) will be released on Friday at 1:30 pm GMT, showing the change in the price charged by producers for their goods and services. The PPI has inflationary implications, but it is not a major market mover unless the actual figure deviates significantly from the forecast.
Technical Outlook – EUR/USD
The pair made a sharp turn, and dollar weakness allowed the euro bulls to take it from 1.1576 at the beginning of the last week to 1.1826 at market close on Friday. Now, the most important level is 1.1900, where the uptrend stopped previously.
That being said, we must keep an eye on 1.1800 as well. The pair was rejected by this level three times in the past, and now a daily candle closed above it. The level could turn into support, propelling the pair higher, or we could see a false break if the dollar strengthens.
In a bullish scenario (true break of 1.1800), the price will continue towards 1.1900, where we will probably see a pullback (the RSI will likely become overbought by then, and the level is a strong resistance). A lot will depend on the geopolitical situation, and the technical aspect will take a step back if new developments occur.
