On Monday, the EUR/USD pair dropped to a two-week low, but no significant sell-off followed, and during the early European session, the pair held above the 1.1650 level. The weakening of the euro is linked to U.S. President Donald Trump's threat to impose 30% tariffs on imports from the United States' two largest trading partners—Mexico and the European Union (EU)—starting August 1. Trump informed European Commission President Ursula von der Leyen and Mexican President Claudia Sheinbaum in separate letters sent on Saturday. This announcement is the latest in a series of over 20 tariff notices issued by Trump since last Monday and complements the existing 50% tariff on copper imports, further escalating trade tensions. Additional pressure on the pair comes from moderate U.S. dollar strength.

Investors have reduced their expectations for Federal Reserve rate cuts this year after the release of positive U.S. employment data for June, which signaled labor market stability. The minutes from the Federal Open Market Committee (FOMC) meeting held on June 17–18 showed that most policymakers are concerned about inflation risks stemming from tariffs and remain cautious about short-term rate cuts. These factors, combined with increased demand for safe-haven currencies, have pushed the dollar to its highest level since June 25, further limiting EUR/USD gains. Nonetheless, it would be prudent to wait for key inflation data—Consumer Price Index (CPI) and Producer Price Index (PPI)—scheduled for Tuesday and Wednesday before opening new positions.

Meanwhile, the European Union has announced an extension of the suspension of retaliatory measures against U.S. tariffs until early August and will continue seeking a resolution through negotiations.

The relatively muted market response to Trump's latest threats, along with uncertainty regarding the next steps by the European Central Bank (ECB), calls for caution before initiating short positions on EUR/USD. ECB Executive Board member Isabel Schnabel noted in an interview that the likelihood of another rate cut is low, as the economy remains resilient and such action would require a significant deviation of inflation from the target. Her colleague Fabio Panetta, however, emphasized the need to continue easing monetary policy if risks to economic growth intensify or disinflationary pressures persist.

Therefore, it is advisable to wait for a clearer downside move in EUR/USD before initiating sell positions. In the absence of major economic events from the eurozone or the U.S. that could significantly impact the market, attention should turn to FOMC member comments for potential short-term trading opportunities. Still, the current fundamental backdrop requires a cautious and balanced approach to position building.

From a technical standpoint, EUR/USD shows signs of consolidation. On the 4-hour chart, the price has approached the 100-period Simple Moving Average (SMA), located below the psychological level of 1.1700, while support has formed just below 1.1650. However, oscillators on this timeframe show negative momentum, indicating a potential for further losses.

If the price continues to decline and breaks below 1.1650, the next significant support lies around 1.1600. A breach of this level could trigger renewed bearish sentiment and lead to a deeper decline.

Conversely, a recovery attempt above the psychological level of 1.1700 may face resistance at the 50-SMA, followed by the 1.1750–1.1745 zone. A sustained breakout above this range would open the path to 1.1800 and then toward the 1.1830 level—September 2021's high and the July peak. If this level is surpassed, further gains toward the psychological mark of 1.1900 are possible.

Nevertheless, on the daily chart, oscillators remain in positive territory, supporting an optimistic outlook and suggesting that the downturn seen on the 4-hour chart reflects only intraday weakness.