EUR/USD Gains as Investors Keep ‘Sell America’ Bet

Key Moments

Geopolitics in Focus as Trump Heads to Davos

Markets are watching Donald Trump ahead of his Davos speech, hoping for calmer trade rhetoric. Overnight trading was calmer, but futures fell again once Europe opened. Investors fear renewed risk-off moves and more dollar weakness if Trump keeps pressing Europe over Greenland.

European officials are considering countermeasures after Trump threatened tariffs on countries opposing his Greenland plans. Germany called the move a “red line,” and the EU may respond with tariffs on up to €93bn of US exports.

Risk Aversion Lifts Precious Metals and Supports EUR/USD

Risk appetite has dropped sharply in recent days. As a result, investors rushed into gold and silver, pushing prices to new highs. Meanwhile, EUR/USD rose despite looming tariff risks.

This shift resembles the 2025 “Sell America” trade. Although military action in Greenland seems unlikely, Trump did not rule it out. His comments could trigger a new trade confrontation and add another headwind for markets.

So far, markets have reacted with clear risk-off behavior. Equities, cryptocurrencies, and the dollar have sold off, while investors moved into gold, silver, and safe-haven currencies like the Swiss franc.

Dollar Weakens as Tariff Threats Intensify

Over the weekend, Trump said he might raise tariffs from 10% to 25% on eight European countries. This fits his “maximum pressure” strategy. Investors now wonder if Europe will abandon its calmer stance and use the Anti-Coercion Instrument to retaliate.

These tensions, along with potential NATO strain, may dominate the policy agenda this week. They could also overshadow Ukraine-related developments.

Markets have responded cautiously so far. Traders remember the so-called TACO trade, where past episodes turned into political theater. Therefore, investors are reluctant to take aggressive positions. Still, the situation remains fluid, and the US dollar index remains under pressure.

Euro Holds Firm Against the Dollar Despite Tariff Risks

Even though the tariff threats hurt Europe’s outlook, the euro has held its ground against the dollar. It has weakened slightly versus other majors, but losses remain limited.

Markets seem to believe European firms have already adapted to tariff volatility from last year. Also, the renewed “Sell America” trade supports EUR/USD. The pair is increasingly seen as a safe-haven alternative to the yen and the dollar.

Fed Uncertainty Adds Another Layer for Dollar Traders

Monetary policy remains a key factor. Uncertainty over Powell’s successor is adding pressure to currency markets. The dollar firmed on Friday after reports that Kevin Hassett would stay at the NEC and Kevin Warsh could lead the Fed. This scenario would likely support the dollar if confirmed.

However, politics may overshadow US data this week. As a result, the dollar could test lower levels, keeping EUR/USD biased higher.

EUR/USD Technical Picture: Key Levels and Structures

Technically, EUR/USD found strong support around its 200-day moving average near 1.1580–1.1600. It also broke above a short-term bearish channel, which adds to the bullish case.

For a clearer trend change, the pair must break out of a larger triangle pattern. Resistance sits near 1.1760, which was tested yesterday. A decisive break above this level could open targets at 1.1800, then 1.1850, and finally the September 2025 high at 1.1919.

On the downside, initial support is near 1.1700. Below that, the 1.1625–1.1660 zone is the next key area to watch.