EUR/USD, FTSE 100 Forecast: Two trades to watch

EUR/USD slips as economic sentiment falls

EUR/USD is falling for a second straight session as the selloff in the USD stabilises.

The US dollar was steady on Tuesday, hovering around its three-year low against the euro and a six-month low against the yen as investors tried to make sense of President Trump's constant changes to his trade tariffs.

The volatility that hit the dollar last week and sent treasury yields surging seems to have calmed somewhat by today, although the market mood remains fragile.

The euro, which has been one of the biggest beneficiaries of the sell-off in US assets, is a touch weaker today as investors digest stronger-than-expected industrial production but a slump in economic sentiment.

The ZEW economic sentiment fell to -18.5 in April from 39.8. Meanwhile, German ZEW economic sentiment has plunged -14 in April, down from 51.6 in March, missing estimates of 9.3 by a wide margin.

Erratic changes in trade policy are weighing heavily on expectations in Germany.

Looking ahead, the market focus will remain on ever-changing tariff headlines for the US after President Trump removed smartphones and other add electronics from its duties on China over the weekend, providing some relief.

ECB president Christine Lagarde will be speaking later today and could provide further insight into the central bank's outlook for rates given the murky outlook. The ECB rate decision will be announced on Thursday.

EUR/USD forecast technical analysis

EUR/USD has been trending higher from early March, rising above the 200 SMA and several key resistance levels to reach a peak of 1.1470. The price has eased back from this multi-year high to current levels of 1.1350. The 50 SMA is crossing above the 200 SMA in a bullish signal.

While the uptrend remains intact, the RSI is well overbought so buyers should be cautious. A period of consolidation or even a move lower.

Support can be seen at 1.12, the September 2024 high, with a break below here opens the door to 1.10 the psychological level and 1.0940.

Buyers will need to rise above 1.14 and 1.1470 to create a higher high and head towards 1.15.

FTSE 100 rises on optimism of Trump exemptions

The FTSE and its European peers are rising for a fourth straight session amid optimism after Trump said he's considering temporary exemptions on vehicle import tariffs. These could benefit UK car makers that export heavily to the US.

President Trump also pushed ahead with probes targeting semiconductor and pharmaceutical imports, keeping UK drug makers such as AstraZeneca and GlaxoSmithKline in focus.

On the data front, figures show that the UK labour market weakened ahead of this month’s tax increase on employers, although wage growth remained strong. This paints a difficult picture for the Bank of England, which also expects an economic hit from U.S. trade tariffs.

In the first three months of this year, UK vacancies fell below pre-pandemic levels for the first time in almost four years, and the number of employees fell by 78,000 in March, marking the biggest drop since 2020. Provisions are likely.

The softening in the jobs market could outweigh the fast pace of pay growth. Average wages rose 5.6% in the three months to February.

Following the data, investors are pricing in a 90% probability of the Bank of England cutting rates by 25 basis points when they meet on May 8. Lower interest rates would benefit domestic stocks such as house builders and retailers. Taylor Wimpey trades up 2.4%. Meanwhile, the pound is trading at a six-month high against the USD.

FTSE 1000 forecast – technical analysis

The FTSE recovered from the 7550 low last week, rebounding higher and bringing the RSI out of oversold territory. The price extended its recovery above 8000, bringing it back into the 8000 to 8400 range within which it traded for most of 2024.

Buyers would need to extend gains above the 200 SMA at 8350 for bulls to gain the upper hand.

Support can be seen at 8000. Below here 7700 comes into focus.