EUR/USD forecast: What now after Trump rules out military action in acquiring Greenland?

Markets sigh relief as Trump says no to military force

 

The markets breathed a sigh of relief during Trump’s speech marathon, where the US President ruled out the use of military to acquire Greenland. Up went stocks, and the dollar and down went the likes of the euro and franc. But does this mean it is risk back on, and markets will kick on from here after the recent falls? Well, time will tell. But caution remains the order of the day. After all, Trump will continue to weaponise his tariffs policy to get the same result. Military use would have been quite the unthinkable and no one really believed the US would have gone down that road anyway. Effectively, nothing new was said or changed, even if Trump’s tone was somewhat more conciliatory. Still, the threat of tariffs is there and a trade war with Europe cannot be ruled out just yet. This should keep risk appetite downbeat until there is more certainty about the future of Greenland and tariffs.

 

EU delays ratification of trade deal

 

Meanwhile, there’s in the latest twist in the US-EU tariff saga, the news coming out of Brussels will undoubtedly annoy Trump. The trade deal has been shelved after the European Parliament froze its ratification vote following Trump’s threats to seize Greenland. The Parliament’s trade committee has now pushed the vote back indefinitely, casting serious doubt on whether the agreement will ever see the light of day. The EU wants the US to “re-engage on a path of cooperation rather than confrontation.”

 

This comes after European leaders have been exploring possible retaliation measures after Trump threatened to impose tariffs on countries opposing his ambitions to acquire Greenland. European leaders appear to be hardening their stance.

 

Don’t forget about the Fed

 

Let’s not forget about the Fed, meanwhile, where the key question remains over who will replace the Chairman Jerome Powell. The dollar firmed on Friday after reports that Kevin Hassett would remain at the National Economic Council, while Kevin Warsh was now seen as the leading candidate for the Fed role, which would be mildly supportive for the dollar if confirmed. Obviously, it looks like politics is likely to overshadow US data this week, with the dollar potentially probing lower levels, keeping the EUR/USD forecast tilted to the upside.

 

Technical EUR/USD forecast and key levels to watch

 

 

The EUR/USD eased back following Trump’s speech. But the trend remains bullish ever since it found good support from the 200-day moving average earlier this week near the 1.1580-1.1600 area. The fact that the resistance of the short-term bear channel has also been taken out, this is also a bullish sign. Price now needs to come out of the larger triangle pattern to signal a more meaningful change in direction. The resistance trend of this pattern comes in around 1.1760 area, which was tested yesterday. A clean break above here would initially target 1.1800, followed by 1.1850 and finally the September 2025 high of 1.1919. Support, meanwhile, comes in around 1.1700 region initially. Below that, the 1.1625 to 1.1660 area, is the next key zone to watch.

 

 

 

 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R