In less than 24 hours, the EUR/USD pair surged over 300 pips, reacting to the newly announced "Donald Trump tariffs." All other fundamental factors faded into the background due to fears of a global trade war. The dollar is plummeting, and the euro is climbing rapidly, ignoring the content of the economic calendar.
Ahead of the so-called "America's Liberation Day" (Trump's name for the tariff announcement day), traders ignored macroeconomic reports—regardless of whether they were positive or negative. For instance, EUR/USD sellers overlooked the ISM Manufacturing Index, which fell into contraction territory, and they also ignored eurozone CPI data, which reflected a slowdown in inflation. On the other hand, buyers disregarded the ADP employment report, which exceeded expectations. The market acted like a compressed spring, ignoring nearly all news triggers.
But then, the spring uncoiled—and not in the dollar's favor. Does this mean the market will return to reacting to classic fundamentals? Or will it continue to ignore them? This is far from a rhetorical question, especially since on Friday—April 4—the most important macroeconomic report of the week will be released: the U.S. Nonfarm Payrolls report. Could strong NFP data help the greenback regain some lost ground?
I believe the dollar will remain under pressure in the near term, and U.S. macroeconomic data will be interpreted based on recent events. Negative news will intensify the pressure, while positive news will likely be ignored (or provide only short-lived support).
According to analysts at Deutsche Bank, traditional fundamental factors have essentially lost their significance—currency fluctuations are now unpredictable. In this context, DB representatives also expressed concern about a potential crisis of confidence in the U.S. dollar.
Especially since the situation continues to escalate, after the tariff announcement, U.S. Commerce Secretary Howard Lutnick stated that the White House will increase duties even further on countries that dare to retaliate. That was a thinly veiled warning to the EU (currently facing a 20% tariff) and China (facing 54%). Both China and the EU have declared their readiness to respond, though they have also signaled openness to negotiations. French President Emmanuel Macron called on French businesses to halt investments in the U.S. and suggested retaliatory measures. Meanwhile, Canada has introduced a 25% tariff on all cars imported from the United States.
Nearly a day after announcing the new tariff plan, Donald Trump himself commented on the situation, saying, "The patient survived and is recovering" (clearly referring to the U.S.). In other words, there are no signs of de-escalation at this time.
This all suggests that the March Nonfarm Payrolls report could increase pressure on the dollar (if it comes in below expectations), but is unlikely to help—even if the data beats forecasts. For example, Thursday's ISM Services Index supported EUR/USD buyers, as it came in below expectations. While economists expected a mild decline from 53.5 to 53.0, the index dropped to 50.8—just shy of contraction territory. It was the weakest reading since June of last year.
As for the NFP data, preliminary forecasts are also discouraging for the greenback. Nonfarm employment is expected to rise by just 139,000, following a weak gain of 150,000 in February. Unemployment is expected to remain at 4.1%—unchanged from two months ago. Meanwhile, wage growth is forecast to slow, with average hourly earnings falling to 3.9% from the previous 4.0%. Labor force participation is also expected to drop to 62.2%—the lowest level since December 2022.
Thus, March NFP data could worsen the dollar's position even if it meets expectations—let alone if it misses. And a "green" report will likely not be enough to save the dollar. Any corrective pullbacks in EUR/USD should be viewed as opportunities to enter long positions.
The first upside target is 1.1150 (upper Bollinger Band on the H1 chart). The main target is 1.1200 (upper Bollinger Band on the monthly chart).
The only factor that could help the dollar is if Trump delays the implementation of the "big" tariffs targeting 60 countries. In that case, the greenback may get a temporary reprieve (until negotiation results emerge) and recover part of its losses. But at this stage, there are no signs of de-escalation from the White House—meaning the dollar remains vulnerable.
