Will the EUR/USD pair be able to break free from the "clutches" of the 17 figure? This is perhaps the main intrigue of the upcoming week. For the past four weeks, the pair has traded in a broad price range, but each time it ended Friday's trading within the 17 figure. This has become a sort of "home port" for EUR/USD, where the price has consistently returned after volatility spikes.

However, by the end of next week, the situation may change—tentatively in favor of the pair's sellers. At least for today, key fundamental events are shaping up in favor of the US dollar. Primarily, this is due to a strengthening of risk-averse sentiment amid the diplomatic stalemate between the US and Iran and a new round of tariff confrontations between the US and the EU. If Donald Trump maintains a hardline stance, further developments will likely follow an escalation scenario. This means the safe-haven dollar will be in higher demand, putting pressure on the EUR/USD pair. It is also worth noting that Trump may once again "play TACO," as he has done before.

Unfortunately, impulsive decisions by the US president are not subject to linear forecasting, but the main scenarios can still be outlined now.

Let me remind you that the day before yesterday, Trump announced plans to increase tariffs on European cars and trucks to 25%. He stated that the European Union is not adhering to the conditions of the trade agreement reached last year (the so-called "Turnberry deal"). In particular, the US president accused Brussels of delaying the ratification process of this agreement, rendering it ineffective. Furthermore, according to Trump, high tariffs are necessary to force European automakers to localize production in the US.

It is important to note that as of today, the official decree to raise tariffs has not yet been signed, but Trump publicly promised to do so next week.

If the White House head implements his threat, the hardest hit will be European countries and companies with a high share of exports to the US and integrated supply chains (Germany, Slovakia, Italy, Sweden). For example, estimates by the Kiel Institute for the World Economy suggest that Germany's short-term losses could amount to around €15 billion, while long-term losses may reach €30 billion. Exports of German cars to the United States have already fallen nearly 10% due to previous tariff increases, so another "tariff strike" could make the delivery of many models simply unprofitable.

The domestic market in the US will also feel the negative effect of increased tariffs: estimates from several analysts suggest that the higher tariffs will cost American consumers about $15 billion a year in markups on cars and parts. Additionally, it should be remembered that the EU prepared a list worth €95 billion last year for the introduction of retaliatory tariffs in the event that the US follows through on its threats against the European automotive industry.

Yet, according to most experts, Germany will suffer the most from the new round of trade confrontation. Specifically, the head of the IFO Institute estimates that the German economy could enter a recession this year if further developments unfold in line with a negative scenario.

Given that Germany is a key driver of the European economy, the consequences of trade escalation will inevitably be felt across the Eurozone.

Therefore, if Trump does not back down from his threats (thus implementing the "TACO principle") and actually raises tariffs on the European automotive industry, anti-risk sentiment in the market will increase again, resulting in heightened demand for the safe-haven dollar.

Additional support for EUR/USD sellers could come from the "Iran case" if Trump outright rejects Tehran's peaceful initiatives. On Saturday (May 2), it became known that Iran, through Pakistani intermediaries, conveyed a new text of a peace agreement to Washington. According to the Iranian agency Tasnim, Iranian representatives indicated their willingness to discuss the reopening of the Strait of Hormuz, but only on the condition that the blockade of Iranian ports be lifted. Additionally, the document raises issues of non-aggression guarantees, the withdrawal of US forces from the region, the unblocking of Iranian assets, compensation payments, and the lifting of sanctions.

Previously, Trump stated that he is not satisfied with Iran's new proposals. However, whether he rejected the aforementioned 14-point peace agreement draft is currently unknown. If the parties fail to reach a compromise, the risks of an escalation scenario will significantly increase. According to the British publication The Guardian, citing a senior Iranian military official, Mohammad Jafar Asadi, a war between the US and Iran "could resume soon" if diplomatic efforts completely stall. Notably, on Sunday, IRGC representatives stated that the US has only two options left: a "non-viable" military operation or an "unfavorable deal." Which way the scales will tip will soon become clear.

Thus, in the coming days, all attention of EUR/USD traders will be focused solely on the geopolitical agenda. Macroeconomic reports will play a secondary, supportive role, either strengthening or weakening the dominant influence of geopolitical factors.

If Trump does not implement the "TACO principle"—that is, does not soften his position at the last moment—the dollar will strengthen significantly across the market, including against the euro. In this case, EUR/USD sellers will break through the support level of 1.1710 (the middle line of the Bollinger Bands indicator on the four-hour chart) and head toward the next support level of 1.1660, which corresponds to the lower line of the Bollinger Bands on the same timeframe.