US Dollar Slips on Trump Tariffs: EUR/USD, USD/JPY Price Action Setups

The US dollar came under broad selling pressure on Monday after President Trump threatened tariffs on any country blocking his move to take Greenland. The rhetoric has effectively reignited trade-war risks, raising the prospect of retaliation — particularly from European countries — even if no formal response has yet emerged.

Dollar weakness suggests markets view Trump’s actions as reckless, inflationary and globally destabilising rather than pro-growth. And with US markets closed for a public holiday, it could also be argued that the initial reaction was understated.

View related analysis:

Source: Tradingview, ICE

US Dollar Weakens as Trump Tariff Risks Return

The US dollar was the joint-weakest currency alongside the Japanese yen on Monday, with USD/JPY effectively flat by the close — though it did print a small bullish hammer on the daily chart.
The New Zealand dollar was the strongest FX major, with NZD/USD rising 0.8% after a run of positive data reinforced the view that the RBNZ has ended its easing cycle and teased the odds of a first hike.
The Swiss franc also made solid gains, with USD/CHF down 0.6% and back below 0.80, marking its most bearish day in 28 days.
The Australian dollar continued to hold above recent range lows, with AUD/USD closing above 67c and forming a bullish engulfing day.
EUR/USD rose 0.4% and printed a prominent bullish engulfing day, its best performance in 20 days.
Across FX majors and crosses, 16 of the top 20 movers recorded daily ranges above their 10-day average — notable given the US public holiday.

Source: LSEG

EUR/USD Technical Analysis: Euro vs US Dollar

The 200-day average came to the rescue for EUR/USD on Monday, with the pair printing a prominent bullish engulfing day at a key support level. This also leaves a three-bar bullish reversal (morning star) in play, which coincided with bullish divergence on the daily RSI (2).

The 4-hour chart shows EUR/USD also produced a false break of the December 9 low ahead of Monday’s bullish reversal. That bear trap adds further weight to the reversal signal.

Bulls could seek dips towards the monthly S1 pivot (1.1620) or the 1.16 handle in anticipation of the euro’s next leg higher. Resistance comes in at 1.1680, the 1.17 handle, and the monthly pivot point at 1.1715.

Source: TradingView

USD/JPY Technical Analysis: US Dollar vs Japanese Yen

The daily chart shows USD/JPY formed a small bullish hammer on Monday, respecting the 20-day EMA. While this hints at a near-term bounce, upside potential looks limited. The daily RSI (2) is not yet oversold, while RSI (14) continues to track lower, suggesting momentum remains fragile.

The 4-hour chart shows a three-wave corrective decline, and its structure does not resemble a bull flag in my view, with momentum remaining too bearish overall. As such, while USD/JPY may enjoy a brief bounce near term, my bias remains for a move towards 157 or the 156.68 high-volume node (HVN) once any corrective rebound is out of the way.

Source: TradingView

View the full economic calendar

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

Delayed London Stock Exchange (LSE) Data

The London Stock Exchange (LSE) market data displayed or referenced on this website is provided on a delayed basis and is not in real time. The delay period may vary but is typically at least 15 minutes. This data is intended for information purposes only and should not be relied upon for trading, investment, or other financial decisions. We do not guarantee the completeness, reliability, or suitability of the data for any particular purpose. Users should consult real-time data sources and obtain professional advice before making any financial decisions.