FX Liquidity 'Worse Than Covid' Amid Tariff Shock. Long EUR/USD?Liquidity Seizes Up: Dealers Report Conditions 'Worse Than Covid' Amid Tariff Turmoil
The intricate plumbing of the global foreign exchange market, typically the world's deepest and most liquid financial arena, experienced a severe blockage in recent days, with dealers reporting liquidity conditions even more challenging than during the peak of the Covid-19 crisis in early 2020. Triggered by the sudden announcement of potential sweeping tariffs by former US President Donald Trump, the ability to execute large trades without significantly moving prices evaporated, creating treacherous conditions for market participants before a temporary pause on the tariff implementation offered a brief respite.
Reports indicate that available liquidity for a single transaction, or "clip," in major currency pairs plummeted to lows around $20 million. While this figure might still sound substantial, it represents a dramatic reduction from the norms in the multi-trillion dollar-a-day spot FX market, where clips of $50 million, $100 million, or even more could typically be absorbed with minimal market impact, especially in benchmark pairs like EUR/USD.
This liquidity drought occurred paradoxically alongside a spike in overall trading volumes. Both algorithmic trading systems and human traders on principal desks were highly active, reacting to the news flow and heightened volatility. However, this surge in activity masked a fundamental deterioration in market quality. High volume accompanied by low liquidity signifies frantic, often smaller, trades occurring across widening bid-ask spreads, with market makers unwilling or unable to provide firm quotes for substantial sizes. It's the market equivalent of a crowded room where everyone is shouting, but no one is willing to make a firm commitment.
Why 'Worse Than Covid'? Unpacking Dealer Sentiment
The comparison to the Covid-19 crisis is stark and revealing. The initial wave of the pandemic in March 2020 caused unprecedented volatility across all asset classes as the world grappled with lockdowns and economic shutdowns. FX liquidity certainly suffered then, with spreads widening dramatically. However, dealers suggest the current environment, driven by tariff uncertainty, felt different, and arguably worse, for several reasons:
1. Nature of the Shock: Covid-19, while devastating, was primarily a health crisis with economic consequences. Central banks globally responded with massive, coordinated liquidity injections and policy easing, providing a clear backstop (even if the initial shock was severe). The tariff announcement, however, represents a political and policy shock. Its potential impact is multifaceted – affecting inflation, growth, supply chains, corporate earnings, and international relations – and far harder to model. The policy path forward, including potential retaliation from other countries, is deeply uncertain.
2. Central Bank Reaction Function: During Covid, the playbook for central banks was relatively clear: provide liquidity and ease financial conditions. In response to potential tariffs, the central bank reaction is much less certain. Tariffs could be inflationary (raising import costs), potentially pushing central banks towards tighter policy, while simultaneously being negative for growth, which might argue for easing. This ambiguity makes it harder for markets to price in a predictable policy response, adding another layer of uncertainty that dampens risk appetite and liquidity provision.
3. Fundamental Uncertainty vs. Panic: While Covid induced panic, the underlying driver was identifiable. The tariff threat introduces deep uncertainty about the fundamental rules of global trade. This makes it exceptionally difficult for market makers, who provide liquidity, to price risk accurately. When risk becomes unquantifiable, the natural reaction is to withdraw, reduce quote sizes, and widen spreads significantly to avoid being caught on the wrong side of a large, unhedged position.
The Tariff Trigger: A Wrench in the Works
Donald Trump's proposal for a "reciprocal" or blanket tariff system, potentially starting at 10% on all imports with higher rates for specific countries, fundamentally challenges the existing global trade framework. The announcement immediately forced market participants to reassess:
• Inflation Outlook: Tariffs directly increase the cost of imported goods, potentially fueling inflation and impacting interest rate expectations.
• Economic Growth: Trade wars can disrupt supply chains, raise business costs, reduce export competitiveness (due to retaliation), and dampen consumer and business confidence, weighing on growth.
• Currency Valuations: Currencies of countries heavily reliant on exports to the US, or those potentially facing steep retaliatory tariffs, came under pressure. The US dollar itself experienced volatility as markets weighed the inflationary impact against the potential growth slowdown and risk-aversion flows.
This complex interplay of factors, combined with the political uncertainty surrounding the implementation and potential scope of such policies, created a perfect storm for volatility. Algorithmic systems, programmed based on historical correlations and data, struggled to navigate a potential regime shift driven by policy pronouncements. Human traders, facing heightened risk and uncertainty, became more cautious. Liquidity providers, facing the risk of being adversely selected (i.e., only trading when the market is about to move sharply against them), drastically reduced their exposure.
The Impact: Beyond the Trading Desks
The evaporation of liquidity has real-world consequences:
• Increased Transaction Costs: Corporates needing to hedge currency exposure for international trade face higher costs (wider spreads).
• Execution Risk: Asset managers rebalancing global portfolios find it harder and more expensive to execute large trades, potentially suffering significant slippage (the difference between the expected execution price and the actual price).
• Systemic Risk: In highly leveraged markets, poor liquidity can exacerbate sell-offs. Margin calls, as reportedly seen alongside the tariff news, can force leveraged players to liquidate positions rapidly into an illiquid market, potentially triggering a domino effect.
The temporary pause in the tariff implementation announced subsequently provided some relief, likely allowing liquidity to recover partially from the extreme lows. However, the underlying uncertainty hasn't disappeared. Until there is greater clarity on the future direction of US trade policy, the FX market is likely to remain susceptible to bouts of nervousness and reduced liquidity.
Should You Long EUR/USD Based on This? A Cautious No.
While the liquidity situation is dire and reflects significant market stress, using poor FX liquidity itself as a primary reason to take a directional view, such as longing EUR/USD, is generally flawed logic.
Here's why:
1. Liquidity is Not Direction: Market liquidity reflects the ease and cost of transacting, not necessarily the fundamental direction of an asset price. Poor liquidity is a symptom of high volatility, uncertainty, and risk aversion. While these factors can influence currency direction (e.g., risk aversion often benefits perceived safe-haven currencies), the liquidity state itself isn't the driver. Both buyers and sellers face the same poor liquidity.
2. Universal Impact: The reported liquidity crunch affected the global spot FX market. While specific pairs might have been hit harder at times, the underlying issue was broad-based risk aversion and dealer pullback, impacting EUR/USD, USD/JPY, GBP/USD, and others. It doesn't inherently favor the Euro over the Dollar.
3. Focus on Fundamentals and Sentiment: A decision to long EUR/USD should be based on a broader analysis of:
o Relative Monetary Policy: Expectations for the European Central Bank (ECB) versus the US Federal Reserve (Fed).
o Economic Outlook: Growth prospects in the Eurozone versus the United States.
o Risk Sentiment: Is the broader market mood risk-on (often favoring EUR) or risk-off (which can sometimes favor USD, though the tariff news complicated this)?
o Tariff Impact Analysis: How would the proposed tariffs, if implemented, differentially impact the Eurozone and US economies? Would potential EU retaliation harm the US more, or vice-versa?
4. Increased Trading Risk: Poor liquidity makes any trade riskier and more expensive. Spreads are wider, meaning entry and exit costs are higher. Slippage on stop-loss orders or take-profit orders is more likely. Executing large sizes is challenging. Therefore, even if you have a strong fundamental view to long EUR/USD, the current liquidity environment makes executing and managing that trade significantly more difficult and costly.
Conclusion
The recent seizure in FX liquidity, reportedly surpassing the severity seen during the Covid crisis onset, underscores the market's extreme sensitivity to geopolitical and policy uncertainty. The threat of sweeping tariffs injected a level of unpredictability that forced liquidity providers to retreat, even amidst high trading volumes. While the temporary pause offers breathing room, the fragility remains. For traders, this environment demands heightened caution, smaller position sizes, and wider stop-losses. Critically, basing directional trades like longing EUR/USD solely on the state of market liquidity is misguided. Such decisions must stem from a thorough analysis of economic fundamentals, policy outlooks, and risk sentiment, while acknowledging that poor liquidity significantly raises the cost and risk of executing any strategy.
EURUSD_SPT trade ideas
EUR/USD Long Setup - Update +318 Pips with 29:1 R/RDescription:
This EUR/USD long position is now up +318 pips since entry and publication a few days ago, running beautifully with a current Risk/Reward Ratio of 29.89.
This trade was executed on the April 7 breakout and additional entries were entered at the retest of the entry zone — a structure we highlighted in advance as a potential launchpad. After forming a clean bullish rejection off that area, price accelerated with strong momentum and is now trading around 1.12386, on track toward our key target zone at 1.21155.
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Technical Setup Recap:
- Entry: Near 1.09200 after confirmed breakout and bullish structure retest
- Stop Loss: 1.08800 (tight structure invalidation)
- Target: 1.21155 (major HTF resistance + institutional supply zone)
- Open P&L: +318.6 pips
- Risk/Reward: 1:29.89
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Fundamental Backdrop:
- EUR is gaining strength on improving EU inflation sentiment and cautious ECB optimism.
- USD remains pressured by mixed economic data and shifting expectations around Fed policy.
- Broader risk-on sentiment and demand for non-USD pairs are fueling additional momentum.
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Closing Thoughts:
This trade exemplifies how combining multi-timeframe market structure with macro fundamentals and disciplined execution can lead to high-conviction, high-reward setups. I’ll continue to update as we approach the 1.2115 zone.
If you caught this move or want more trade setups like this — follow us for real-time analysis, before-and-after breakdowns, and swing trade plays across Equities, Currencies, and Commodities.
EUR/USD Weekly Analysis 6-April-2025The Euro started moving in the ascending channel
It is currently in a corrective wave,
But considering the wedge formed and the pin bar candle in the 4-hour chart
It seems that the correction has ended and the price is starting to move upwards
And on the other hand:
In addition to the channel ceiling, the price is facing the intersection of three resistance lines above
So I expect the price to decline upon hitting this strong resistance zone
(As shown in the chart)
*Be profitable
Thank you for expressing your opinion by liking and commenting
EurUsdThe EUR/USD market initially tested a significant daily resistance zone, which prompted an expected bearish continuation. Following this, the market formed a clear M-pattern, indicating a potential reversal. As the price retested the neckline of the M-pattern, this confirmed the continuation of the bearish trend. Consequently, further selling pressure was anticipated, aligning with the established market structure and technical signals.
The Endgame for EUR/USD? Final Impulse Before a Macro Reversal📉 FX_IDC:EURUSD Forecast — Final Growth Phase Within a Corrective Structure
🌍 Macro View (Weekly Chart):
FX:EURUSD remains in a long-term corrective structure that has been developing since 2008. The sequence of zigzags and connecting waves suggests a W–X–Y pattern, where the current upward leg is part of wave (B) before a potential final drop into wave (C).
🧭 Mid-Term Structure (3D Chart):
Since early 2023, wave (B) has been unfolding to the upside, with wave C forming inside it as a five-wave impulsive move.
⏱️ Short-Term Structure (6h Chart):
Since the start of 2025, an impulsive wave structure has been developing. Currently, OANDA:EURUSD is likely completing wave 3 and entering wave 4.
⚠️ Wave 4 may take one of the following forms:
FL — Flat
EFL — Expanding Flat
RFL — Running Flat
cT — Contracting Triangle
bT — Barrier Triangle
d3 — Double Three
Once wave 4 completes, I expect a final push upward (wave 5), marking the culmination of the current cycle before a potential reversal into wave (C) of the higher degree.
🔁 Correlation with the ICEUS:DXY TVC:DXY :
This outlook closely aligns with my previously published forecast on the CAPITALCOM:DXY , which has already started playing out:
🔗
📌 FOREXCOM:EURUSD holds potential for completing its fifth wave up, after which a reversal and the beginning of a broader decline may follow.
The scenario is further validated by the mirror correlation with DXY dynamics.
EUR/USD Bullish Breakout & Retest Setup – Targeting 1.10955Instrument: EUR/USD
Timeframe: 30-Minute
Indicators Used:
EMA 30 (Red): 1.09821
EMA 200 (Blue): 1.09698
Key Levels Identified:
Entry Point: 1.09695
Stop Loss: Around 1.09067
Resistance Zone: ~1.09911
Target Zone: ~1.10918 to 1.10955
Projected Gain: ~147.3 pips (1.35%)
Price Action Analysis:
Bullish Breakout:
The price broke out from a consolidation zone (marked in purple).
A bullish trend is forming as price moves above the 200 EMA.
EMAs Alignment:
The 30 EMA is currently above the 200 EMA, indicating a potential bullish trend continuation.
However, price is slightly below the 30 EMA now, suggesting some short-term pullback or resistance.
Retest at Entry Zone:
Price retested the entry zone at 1.09695 after the breakout and is now hovering near it.
This retest is healthy for confirming support before another move up.
Trade Setup Insight:
Entry Strategy: A long (buy) entry at or around 1.09695.
Stop Loss Placement: Below the previous support zone near 1.09067 to manage risk.
Target Strategy: Aiming for the resistance zone around 1.10918–1.10955 for profit booking.
Conclusion:
This looks like a bullish continuation setup with a favorable risk-reward ratio. The confluence of:
EMA support,
Price structure (breakout & retest),
and defined resistance/target zone
EUR/USD Weekly Resistance Rejection – Potential Short SetupAfter a strong bullish rally, EUR/USD has approached a major weekly resistance zone around 1.1295, a level that has held multiple times since 2023.
On the weekly timeframe:
Price has tapped into this resistance area and is showing signs of hesitation.
The RSI is at 67.59, approaching overbought territory.
A solid move has already played out, and we could be looking at a potential mean reversion move.
Volume has spiked, indicating possible distribution.
I've placed a short position at the current level, targeting a move back toward the 1.0950 area – near previous consolidation and the rising 21-week SMA (now at 1.0560, gradually catching up).
Stop loss: 1.1295
Take profit: 1.0950
Risk: -2.25 CAD on a 20,000 unit position
This setup offers a decent risk-to-reward ratio, and I'm closely watching how price behaves around this resistance. If the level breaks with momentum and volume, I’ll re-evaluate the bearish bias.
What do you think? Do you see EUR/USD pushing through or rejecting hard from here?
#EURUSD #Forex #TechnicalAnalysis #SwingTrade #Resistance #RSI #WeeklyChart #ShortSetup
EURUSD: Watch for buys around 1.09625!Hey traders!
EURUSD has played out beautifully according to yesterday’s analysis, hitting our key levels with precision. The bullish momentum remains intact, and I'm still targeting the previous week's high at 1.11450.
Before the next leg up, I anticipate a pullback towards the Asian session low around 1.09625. This level could serve as a potential liquidity grab and demand zone, a perfect spot for buyers to step back in.
✅ Watch for bullish rejections or confirmation candles around 1.09625 to signal that buyers are defending the level. If confirmed, it could be the start of a solid move back to the upside.
📊 What’s your bias on EURUSD today? Bullish or bearish?
Let me know in the comments below! 👇
If you found this idea helpful, please consider supporting it with a boost, your support means a lot! 🙏🔥
Previous Idea
How it played out
EUR-USD Swing Short! Sell!
Hello,Traders!
EUR-USD grew nicely
Today but will soon hit
A horizontal resistance
Level of 1.1279 so after
The retest we will be
Expecting a local bearish
Correction and a move down
Sell!
Comment and subscribe to help us grow!
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EUR/USD Breaks the Rules: Rising Euro Defies Falling YieldsEUR/USD is rising despite a falling 10Y yield differential, signaling a divergence from typical rate-driven behavior. This move is likely fueled by expectations of Fed rate cuts due to soft U.S. economic data, a recovering Eurozone trade surplus, and broader macro flows like de-dollarization and geopolitical tensions. Tariff risks and speculative positioning are also driving capital toward the euro, overriding yield-based fundamentals for now
EURUSD POSSIBLE TRADE SETUPPotential Trade Setup on EURUSD
EURUSD is on a strong 3-week rally correction that was almost got rejected on Friday due to the UK and US GDP data that came pretty strong and weak respectively.
That said, I am still quite anticipating for a possible correction to continue towards the 50% fib level at 1.0650, before we can start looking for a possible buy entry in the long term.
Trading Plan:
1. BUY if the resistance gets broken and retest successfully.
2. SELL if the current region acts as resistance for rejection towards the downside with an engulfing called on the 4H chart.
Targets:
1. Can be 1:2 for either entries.
Tips:
1. The RSI (1d) indicates an Overbought but easing gradually towards the 50 level.
Please like, follow, and comment!!
You may find more details in the chart!
Thank you and Trade Responsibly!
❤️PS: Please support with a like or comment if you find this analysis useful for your trading day❤️
EURUSD Technical AnalysisTechnical Analysis
The RSI indicator recently reached oversold levels, suggesting strong downward pressure. Currently, RSI is testing a descending resistance trendline, which has previously acted as a dynamic ceiling for momentum.
Given this setup, there is a higher probability that the price may continue to move lower, especially if RSI gets rejected at this trendline once again. Traders should watch for confirmation signals before entering any short positions.
EURUSD Elliott Wave AnalysisHello friends (especially Mr. Mehdi)
I left this analysis for Mr. Mehdi.
Given our prediction that the price growth in the EURUSD currency pair was expected, this analysis went completely according to our expectations, of course I hope you have benefited from this analysis.
Now, considering the formation of a 5-wave pattern in wave 1 of 3 or C and waves 2 and 3 of the main wave 3 or C,
We will expect the formation of a corrective wave in the main wave 4.
Given the price reaching 1.618 wave 1 and forming a shadow, we will most likely enter a correction.
Given the strength of its wave 3, this correction can be partial or deep.
But considering the support levels, the minimum correction will be the 1.07500 range, if this level is lost and decreases, the next range will be 1.0600 and then, less likely, the 1.0500 range.
Be successful and profitable.
Lingrid | EURUSD breaks HIGHER Amid Dollar WeaknessFX:EURUSD market broke and closed above the consolidation zone. The price broke above the previous month's high and nearly tested the high of 2024. The price overall is making higher highs and higher lows, and at this point, the price may form a triangle pattern around the key level at 1.1000 before continuing to push higher. If the market rejects the support level, we can expect the price to move to higher levels, at least retesting the recent resistance zone. My goal is resistance zone around 1.11075
Traders, if you liked this idea or if you have your own opinion about it, write in the comments. I will be glad 👩💻
EURUSD | 10.04.2025SELL 1.10750 | STOP 1.11650 | TAKE 1.09550 | Since the beginning of April, the price continues to move in a wide sideways channel. Probably consolidation is turned to further strengthening of the US dollar. Accordingly, we expect the price to go down and consolidate under the level of 1.09000 with further downward movement.
EURUSD SHORT CONCEPTE-U sell sides swing concept.
I'm precipitating an upsurge in the dollar index and a vice versa on both EURUSD & GBPUSD.
Since last week Friday, we've been on a low resistance liquidity run to the downside 1 hr t.f.
Though we got to a HTF sweet spot/ point of interest on selling pressure. We're kinda sluggish to melt to the downside.
I might not know what move the markets might pull out today, but I'm looking for that selling pressure.
I'll only look for buying pressure if the market gets above prev monthly highs and shows buy side interest.
Comment below on what you think, hit that boost & follow for more content.
Stay tuned for updates, entries and more...
Don't Let It Slip Away: Dragon Signal Active on EUR/USDHi traders! Analyzing EUR/USD on the 1H timeframe, spotting a potential Dragon pattern with long opportunity:
🔹 Entry: 1.0956
🔹 TP: 1.11367
🔹 SL: 1.07787
Price action has formed a classic Dragon pattern — two symmetrical legs and a clear head, with the neckline (the hump) being retested as support. Currently, the pair is testing the neckline zone just above the 200 EMA. RSI is mid-range and curving up, showing early signs of bullish momentum.
If the neckline holds, we may see a strong bullish wave toward 1.1136. This pattern often leads to explosive upside moves once confirmed.
⚠️ DISCLAIMER: This is not financial advice. Every trader must evaluate their own risk and strategy.
EUR/USD Clears Resistance, Eyes 1.1200 RetestThe euro jumped +1.66% on the day, decisively clearing the key 1.0940 resistance level with a powerful bullish candle that now opens the door to a retest of the August 2024 high near 1.1200.
🔹 MACD remains in bullish territory, reaffirming upward momentum
🔹 RSI is climbing near 69, approaching overbought but not flashing reversal yet
🔹 Price now trades well above the 50-day and 200-day SMAs, both rising
Momentum is clearly in the bulls' favor. As long as EUR/USD holds above 1.0940, pullbacks may be seen as buying opportunities ahead of a potential break toward 1.1200.
Trend shift confirmed. Bulls back in charge.
-MW