EURUSD volatility has increased significantly due to Trump’s actions and speeches since before the U.S. election. From September to February, EURUSD fell from 1.12 to below 1.02, but at the start of this month, it surged 5% in just 7 days. 

Trump’s tariff threats and pressure over Ukraine have brought European countries together once again. The planned increase in military spending is expected to boost growth and productivity, but it may also lead to inflationary pressures. As a result, EU bond yields are rising rapidly. Lagarde recently stated that both tariffs and extra government spending make inflation harder to keep stable. While the ECB is still expected to cut rates this year, the overall outlook is shifting, and the FX market may have priced this in too quickly. 

However, the tariff threat remains, and as Trump mentioned, April 2 could be a big day, though perhaps not a good one. Tariffs and counter-tariffs could have stagflationary effects on the economies. Still, the EU’s new fiscal and defense initiatives might ultimately favor the EUR over USD in the long run. 

(EURUSD Long Term Trend) 

The long-term downtrend channel remains intact for EURUSD, and it is a very strong one. Breaking out of a 17-year-long trend channel will not be easy. However, the developments in the last few weeks could be the first signs of a fundamental shift, one that might eventually bring an end to this long-term trend. 

With the recent surge, EURUSD has moved much closer to the upper band of the trend channel, which is near 1.11 and aligns with the long-term 23.6% Fibonacci retracement level, providing additional technical significance. 

(EURUSD Daily Chart) 

However, it might still be too early for the long-term trend to be tested. The tariff threat remains unresolved, and after a 5%+ rally, a downward reaction may be due. 

Recently, EURUSD moved more than 4 standard deviations away from the 50-day moving average, a move not seen since 1996. Typically, major trend reversals occur when price extends 3 standard deviations beyond the 50-day moving average, suggesting that a short-term correction could be on the horizon. 

If such a correction occurs, it could present buying opportunities for the medium term as EURUSD gathers strength for a potential long-term trend breakout. Key downside targets in the event of a pullback include 1.08, 1.0675, and 1.06.