Despite U.S. President Donald Trump's efforts to secure more trade agreements, the U.S. dollar continues to decline sharply against several other assets as negotiations with China and Europe falter due to communication breakdowns and new tariff threats.
So far, there have been few signs of breakthroughs with either of the two largest American trading partners. The path forward has recently become even more complicated, as Trump has once again walked the fine line between trade negotiations and statements that escalate tensions. This rhetorical juggling act, typical of the president, has taken on a sharper tone this time, given the fragility of the previously reached truce. Investors are nervously watching his every word, knowing that one careless remark could trigger a new wave of tariff wars and destroy the hard-won trust.
The situation is further complicated by the fact that all sides seem to be in a waiting game, hoping to outmaneuver each other. China, facing internal economic difficulties, is unlikely to make significant concessions, while the Trump administration, buoyed by U.S. economic growth, feels justified in dictating terms. European authorities are taking a similar approach, receiving demands for concessions from the U.S. but giving little in return. This hardline stance on all sides has led to a stalemate with no obvious resolution.
Tensions between the U.S. and China intensified after Beijing announced late last week that Washington had seriously undermined the recent tariff truce and threatened to defend its interests, hinting at possible retaliatory measures. This came after the Trump administration accused the Chinese government of delaying lifting export controls on rare earth metals, which the U.S. considers a cornerstone of the deal.
The White House on Monday attempted to move forward by organizing a phone call between Trump and Chinese President Xi Jinping to ease tensions. White House Press Secretary Karoline Leavitt stated that leaders' remarks are expected later this week. However, Xi's representatives have yet to respond publicly.
Meanwhile, the European Union issued a new warning about countermeasures if Trump follows through with his tariff threats. The European Commission, which handles trade matters for the bloc, criticized Trump's proposed 50% tariffs on steel and aluminum, stating that they would undermine efforts to resolve trade barriers. Officials have warned that they are prepared to take retaliatory measures if no agreement is reached.
Experts note that Trump's negotiating style is rooted in his fundamental belief in tariffs as an economic tool to reshape global trade and his conviction that extreme threats will yield maximum results during the 90-day pause following his tariff increases on April 2, allowing time for negotiations.
So far, the only trade deal Trump has secured is with the United Kingdom. However, many market participants note that the deal is vague and has little impact on trade relations between the two countries, failing to address major issues. Deals with other major partners promised by the president and his advisers have yet to materialize.
It's worth noting that Trump's tariffs are also under legal threat after the U.S. Court of International Trade ruled last week that most tariffs were illegally imposed and ordered to be blocked. An appeals court suspended the decision to allow for review. If upheld, it would deliver a serious blow to Trump's economic agenda and his ability to leverage foreign capital.
For now, all this is working against the U.S. dollar, supporting the euro, pound, and other risk assets.
Current Technical Picture: EUR/USD
Buyers now need to think about how to capture the 1.1420 level. Only this will allow aiming for a test of 1.1460. From there, it would be possible to push up toward 1.1490, but achieving this without the support of major players will be difficult. The ultimate target would be the 1.1520 high. If the trading instrument declines, serious buying activity can be expected only around the 1.1400 area. If there's no support there, it would be wise to wait for a retest of the 1.1380 low or open long positions from 1.1347.
Current Technical Picture: GBP/USD
Pound buyers need to capture the nearest resistance at 1.3555. Only this will allow them to target 1.3602, above which a breakout will be quite challenging. The ultimate target will be the 1.3640 area. In case of a decline, bears will try to regain control over 1.3505. If they succeed, breaking through this range would seriously damage the bulls' positions and push GBP/USD toward the 1.3480 low, with a prospect of falling to 1.3450.
