The euro has been gaining steadily in recent days, while the US dollar has plunged. This is a direct market reaction by traders and investors to Mr. Trump's claims on Greenland. As Europe considers how best to respond to President Donald Trump's recent threats to Greenland's sovereignty, one of the most extreme potential countermeasures has surfaced online and is being widely discussed.

It is widely known that European countries hold trillions of dollars of US bonds and equities, some of which sit in sovereign funds. That has prompted speculation that European policymakers could sell those assets in response to a renewed tariff war by Mr. Trump, a move that could push up US borrowing costs and depress equity prices, given America's reliance on foreign capital. Such a sale would also trigger a sharp fall in the dollar and a stronger euro.

However, that scenario appears unlikely for several reasons. First, although European countries do own significant US assets, selling trillions of dollars of holdings would be logistically extremely difficult and could destabilize Europe's own financial markets. A mass sell?off would crash prices for those assets and inflict severe losses on European investors.

Second, the political fallout from such a move would be enormous. A sharp dollar collapse and disruption to the US economy would damage global trade and growth and would, in turn, harm Europe. Moreover, such a step would be seen as a hostile act against the United States and would invite serious political repercussions and possible US countermeasures.

Third, European policymakers understand the interconnectedness of the global financial system. Actions meant to undermine the US economy would inevitably reverberate across Europe. For that reason, a diplomatic solution and mutually acceptable compromise are a far more likely outcome than radical, destructive measures.

It is also important to note that a large share of those US assets is held in private funds that are not government-controlled, and, in any case, a sell?off would probably do more damage to European investors than to the United States. Given policymakers' reluctance to pick a major fight with Mr. Trump since his return to power a year ago, the likelihood that politicians will go that far is small.

A technical outlook for EUR/USD suggests that buyers should consider reclaiming 1.1675. Only that would allow a test of 1.1700. From there, a move to 1.1720 is possible, although advancing beyond that without support from major players will be difficult. The extended target is the high at 1.1742. On a decline, I expect meaningful buying interest only near 1.1650. If no buyers appear there, it would be prudent to wait for a new low at 1.1615 or to open long positions from 1.1580.

As for GBP/USD, buyers of the pound sterling need to capture the nearest resistance at 1.3440. Only that will allow a move toward 1.3460, above which a breakout would be challenging. The extended target is the area around 1.3489. If the pair falls, bears will try to seize control at 1.3420. If they succeed, a break of that range would deal a serious blow to bullish positions and could push GBP/USD down to 1.3400, with scope to extend to 1.3360.