Currencies: Tariffs have taken the wind out of the sails (for now)

All was (almost) well until the announcement of an effective tariff increase. This should not have come as a surprise to the financial community, but clearly it did. Lulled into sweet illusions of leniency, it woke up with a hangover.

Despite the US Federal Reserve's standstill and the European Central Bank's 25 basis point cut, the EUR/USD exchange rate suffered little from these decisions, which were expected in any case. No, it took the announcement of increased tariffs on the United States' main trading partners to send the euro back up 22 points. Thus, the recovery from the mid-January lows finally stalled, even though it had broken through resistance at 1.0470. For the time being, the latest lows are providing resistance at 1.0177, but the gap left open at 1.035 will have to be filled quickly if we are to have any hope of seeing the euro surge again. If not, it could return below parity towards 0.9980/0.9910.

As for commodity currencies, it's still too early to confirm the end of the underperformance underway since last September. The aussie and the kiwi failed miserably at their resistance levels of 0.6315 and 0.5730, hitting new lows. We'll be keeping a close eye on the supports at 0.6094/0.6082 and 0.5510/.5470 to halt the current fall and consider rebounds towards 0.6280 and 0.5709. Bear in mind, however, that only breaching these levels will confirm a real upturn.

Finally, USD/JPY successfully tested the 154.10 level, which also corresponds to the 100-day moving average, while the key support zone on USD/CHF between 0.9000 and 0.8960 also played its role well, sending the currency back to its previous highs at 0.9169/0.9201. Potential targets lie at 0.9224 and 0.9270 or even 0.9350.