The EUR/USD pair has recovered, rising to 1.1606, an increase of 0.37%, following four straight sessions of declines attributed to global risk aversion. The rebound occurred as the U.S. dollar experienced a significant decline after renewed tariff threats from Donald Trump, who declared a “massive increase” in duties on Chinese imports scheduled to take effect on November 1, 2025. The recent action has rekindled tensions in the U.S.–China trade war, prompting investors to seek refuge in safer assets and enabling the euro to bounce back from its two-month low of 1.154. The Dollar Index, which gauges the performance of the greenback against six key currencies, experienced a decline of 0.52% to 98.87, representing its most significant weekly drop since July. The dollar’s prior strength, which had propelled the DXY up nearly 1.7% earlier in the week, started to diminish in the face of escalating geopolitical concerns. In France, President Emmanuel Macron has reappointed Sébastien Lecornu as Prime Minister, following a government crisis that was initiated by Lecornu’s resignation just days prior. Lecornu committed to reinstating stability and advancing the 2026 budget, which has momentarily alleviated concerns regarding a wider political collapse in France. Nonetheless, investors exercise caution, bearing in mind that parliamentary gridlock persists as a challenge for Macron’s administration.
In Asia, the uncertainty surrounding Japan’s leadership has contributed to increased volatility in global FX markets, leading traders to reevaluate their risk exposure. The recent implementation of tariffs by Trump has emerged as the primary factor influencing fluctuations in all major currency pairs. The proposal for a 100% tariff on Chinese goods elicited swift responses: equities declined sharply, oil prices fell beneath $60 per barrel, and there was a notable increase in safe-haven investments in the euro and yen. The resurgence of tariff discussions has brought to mind the 2019 trade war, during which the S&P 500 experienced a decline exceeding 6% in just one week, while the dollar exhibited a turbulent yet ultimately declining trend. Market participants are anticipating extended global uncertainty, with volatility indices such as the VIX expected to surge by over 40% as we approach November. The ongoing partial shutdown of the U.S. government has resulted in delays for crucial economic indicators, creating a sense of urgency in the markets for new insights. The University of Michigan Consumer Sentiment Index for October registered at 55, marginally lower than September’s 55.1, yet surpassing expectations of 54.2, indicating a degree of cautious resilience among consumers. Inflation expectations experienced a slight decline, with one-year forecasts decreasing from 4.7% to 4.6%, while five-year expectations remained unchanged at 3.7%.
Nonetheless, market participants are apprehensive regarding the overall macroeconomic landscape: declining employment growth, increasing borrowing expenses, and persistent fiscal ambiguity may impact sentiment ahead of the Federal Reserve’s meeting on October 29, where there is a 94% probability of a 25-basis-point rate reduction being priced in. The euro’s short-lived rebound indicates a momentary alleviation instead of underlying robustness. The resignation and reappointment of Lecornu have created a sense of stability in the headlines; however, the fundamental fiscal disarray in France remains unaddressed. Market participants observe that Macron’s centrist coalition faces challenges in advancing budgetary reforms in parliament, while rating agencies are vigilantly assessing the risks of fiscal slippage. Meanwhile, Germany’s latest industrial production data indicated a contraction of 0.3% month-on-month, highlighting the fragility of the eurozone’s economic rebound. In light of this, European bond yields have decreased, offering temporary relief for the currency as traders prepare for a potential technical rebound towards the 1.166 resistance level.
The price action of the pair indicates a technical effort to stabilize following a prolonged downturn. The decline beneath the 100-day Simple Moving Average at 1.1633 earlier this week established a short-term bearish outlook; however, Friday’s rebound above 1.1600 indicates a potential reduction in selling pressure. The Relative Strength Index has increased from 34 to approximately 50, indicating that momentum is stabilizing. Immediate support is positioned at 1.1550, with the next level at 1.1500, coinciding with the August swing low of 1.1391. Resistance is identified at 1.1650 and 1.1700, with a breach above the latter expected to aim for 1.1830, the high from July 1. The market exhibits a cautious bias, yet it is transitioning toward a neutral stance as traders reevaluate the dollar’s susceptibility amid tariff pressures.