The US Dollar Index remains under strong pressure amid a strengthening Japanese yen. Rumors of currency intervention in Japan significantly increased demand for the yen and triggered a collapse of the American currency across the market. Additionally, pressure on the greenback intensified after another aggressive statement by Donald Trump, who threatened to impose 100% tariffs on imports from Canada.
Reacting to the prevailing fundamental background, the EUR/USD pair began the trading week with an upward gap. Friday's trading ended at 1.1828, while Monday's trading started at 1.1867 (and then the price rose to the boundaries of the 19-figure, updating a four-month high). However, unlike the USD/JPY pair, which also opened the week with a gap, EUR/USD sellers closed the gap by the beginning of the American session on Monday. German IFO indexes contributed to this, which turned out to be "in the red zone." However, this factor did not and does not have a decisive significance. The EUR/USD pair follows DXY, or rather mirrors its contradictory dynamics.
First and foremost, it should be noted that the "yen factor" is gradually receding into the background, at least in the context of the euro/dollar pair. By the way, the USD/JPY pair is also gradually retracing after a southward impulse, reflecting traders' changing sentiment. The dollar is switching to other fundamental factors, most of which are quite contradictory.
For instance, the greenback reacted negatively to another aggressive statement by Donald Trump, who threatened Canada with 100% additional tariffs if Ottawa signs a trade agreement with Beijing. This threat arose against the backdrop of Canada's decision to lower (and significantly reduce) customs tariffs on Chinese electric vehicles—from 100% to 6%. As a reciprocal "gesture," China reduced most tariffs on Canadian agricultural products.
The US president reacted sharply to this news. According to him, Canada will become a channel for supplying Chinese goods to the American market, calling the concluded agreement a "disaster for America." In this context, Trump threatened Ottawa with an additional 100% tariffs.
Amid another wave of trade tensions, the dollar came under additional pressure. However, throughout the day, the situation somewhat eased due to "reconciling" statements from Canada and the United States.
Specifically, Canadian Prime Minister Mark Carney stated that his country does not intend to seek a free trade agreement with China and that the compromises reached with Beijing "fully comply with Ottawa's commitments under the trilateral CUSMA agreement with the US and Mexico."
At the same time, US Treasury Secretary Scott Bessent denied reports that the United States would "automatically" impose new 100% tariffs. According to him, this would only happen if "Canada goes further" and allows the dumping of Chinese goods.
Against this backdrop, the EUR/USD pair retreated from its reached price highs but did not return to the 17-figure area.
The fact is that, besides Canada, there is also Greenland. Despite the fairly successful Davos Forum, during which Trump agreed not to impose new tariffs on European countries, the "Greenland case" continues to exert background pressure on the dollar. Moreover, the information here is quite contradictory.
In particular, according to some insiders, the American leader and the White House continue to consider the possibility of a military takeover of the Danish island. But if we believe sources from Reuters, the US administration has indeed abandoned this idea due to the threat of impeachment for President Trump if the operation on the island is conducted without Congress's consent (i.e., following a scenario similar to Venezuela's).
Additionally, traders are nervously reacting to the threat of a new US shutdown: Democrats in the Senate are threatening to block government funding if the budget bill includes funding for the Department of Homeland Security. By the end of January, Congress must reach a compromise, otherwise federal agencies will again suspend operations.
Amid such contradictory signals, market participants remain cautious: the northern impulse has weakened (buyers could not test the 19-figure), but sellers have not returned to the 18-figure area.
It is noteworthy that traders ignored a fairly strong report released on Monday in the US. It was revealed that total durable goods orders increased by 5.3% in November, after a 2.1% decline the previous month. The forecast was 3.1%. Excluding transportation, the indicator also came in the "green zone": growth was 0.5%, with a forecast of 0.3% (a weak 0.1% growth was recorded in October).
Generally, Durable Goods Orders have a significant impact on EUR/USD, especially when the result differs from forecasts. However, in this case, market participants completely ignored the release.
All of this indicates that the pair is fluctuating "on emotions," while ignoring classic fundamental factors. In conditions of such uncertainty, both buying and selling EUR/USD appear equally risky given the chaotic price movements. Therefore, for now, it is best to stay out of the market until clearer and more definite market signals appear.