A mixed situation has developed around the EUR/USD pair. On the one hand, the bearish sentiment prevails: last week, the price reached a 5-month high at 1.0955, while on Tuesday, the pair updated its nearly three-week low at 1.0778. Conversely, it appears that the southward trend in the pair is beginning to stall. The overall result (so far) favors EUR/USD sellers, but the amplitude of the upward corrections has been increasing recently. For example, Monday's trading ended at 1.0782, while Monday's high was recorded at 1.0859. As mentioned earlier, buyers marked an intraday low at 1.0778 but then returned to the 8th-figure zone.

This all suggests that the EUR/USD pair is following the greenback, mimicking the trajectory of the U.S. Dollar Index. In this duo, the euro acts as the "follower."

For example, traders of the pair essentially ignored European PMI indices on Monday. The business activity indices for Germany's (and the Eurozone's) manufacturing sector increased, although they remained in the contraction zone. Though the PMI indices for services remained in the expansion zone, they slightly declined. In response to the release, EUR/USD briefly surpassed Monday's high but reversed 180 degrees, closing the day within the 7th figure zone.

On Tuesday, the IFO indices were published, and they also favored the euro despite the "red tint" of some components of the release. The German business climate index increased to 86.7 in March. On one hand, this result fell short of the forecast (86.8), but on the other hand, it marked the highest result since July of last year. Additionally, the index has shown an upward trend for the third consecutive month. The IFO index of current economic conditions rose to 85.7, exceeding the forecast of 85.5. The IFO expectations index, which reflects German entrepreneurs' projections for the next six months, increased to 87.7 in March. This also marked the highest result since June 2024, showing an upward trend (for the third consecutive month).

In other words, the March IFO report was quite strong, reflecting optimism among German entrepreneurs, despite the "headline" index remaining in the red zone. The growth in optimism is primarily tied to the Bundestag's approval of a multi-billion euro investment package for infrastructure and defense this month. The law (already signed by the President of Germany) includes loosening the "debt brake" for defense spending and allocates 500 billion euros for upgrading the country's infrastructure.

The IFO indices dampened EUR/USD's intraday downward impulse, allowing buyers to organize another corrective bounce.

Additionally, traders reacted to the U.S. Conference Board's consumer confidence index, which again came out in the "red zone." The forecasted decline was 94.2, but the index dropped to 92.9, the lowest value since February 2021. This indicator has been falling for the fourth consecutive month.

Nevertheless, despite such "unipolar" reports, long positions in EUR/USD still appear risky, as the overall fundamental backdrop does not support sustained price growth.

The U.S. Dollar Index is sensitive to news and insider information regarding new tariffs set to go into effect on April 2. On Monday, insider information from the WSJ suggested that the White House had reconsidered introducing broad-based sectoral tariffs and was now preparing to implement individual tariffs for 15 countries with a persistent trade imbalance with the U.S.

Donald Trump also hinted that "certain countries" may be exempted from these reciprocal tariffs "if he deems it necessary." However, the President did not specify which countries might be placed on the "white list" or what criteria would be applied.

News/insider information suggesting that the U.S. will implement smaller import tariffs than previously expected supports the U.S. currency, as a more "peaceful" trade policy from Trump reduces the risk of recession in the U.S. Recall that Fed Chairman Jerome Powell expressed concerns about trade tensions at the March meeting, stating that the likelihood of a U.S. recession has increased. Therefore, any signs/signals/insider information pointing to the de-escalation of tariff disputes play in favor of the U.S. dollar.

Despite the sharp decline in the consumer confidence index, EUR/USD is trading at the bottom of the 8th figure after briefly rising to 1.0831. This suggests that long positions in the pair remain risky, and corrective pullbacks should be used as opportunities to open short positions.

From a technical standpoint, EUR/USD buyers failed to break the 1.0830 resistance level, corresponding to the middle line of the Bollinger Bands on the four-hour chart. The pair is currently between the middle and lower Bollinger Bands lines on H4 and below all lines of the Ichimoku indicator, signaling a preference for short positions. The first target for the downward movement is 1.0780 (the lower Bollinger Bands line on H4). The primary target remains 1.0730 (the middle line of the Bollinger Bands on D1), and a break of this level would open the way for EUR/USD sellers to the 6th figure.