Current Dynamics: Trade Disappointments and ECB Pause
The recent trade agreement between Washington and Brussels was met with clear disappointment from both market participants and EU politicians. While the deal successfully averted further escalation, it is viewed as heavily favoring US interests: a 15% tariff on European imports, a commitment from the EU to purchase $750B in US energy, and an additional $600B in investments in US businesses. These obligations pose a heavy burden for the eurozone—especially for Germany’s crucial automotive sector.
On the monetary front, the ECB paused its dovish cycle last week to assess the impact of previous measures. However, analysts widely expect that further rate cuts will be needed before year-end—both to offset the impact of US tariffs and to prevent inflation from slipping below the 2.0% target. Today’s eurozone CPI data came in at 2.0% (forecast: 1.9%), with core inflation at 2.3%.
Fed Stays Hawkish as US Data Strengthens the Dollar
The Federal Reserve, by contrast, signaled a prolonged pause in rate cuts after holding the policy rate at 4.50% during Wednesday’s meeting. Chair Jerome Powell highlighted the risk of renewed inflation, citing June’s CPI jump to 2.7% and a sticky core PCE index at 2.8%. Upcoming labor market data will be critical; if unemployment remains below 4.2% and job growth is steady, the dollar will retain strong fundamental support.
Technical Outlook: Key Levels and Scenarios
EUR/USD is correcting down from yearly highs at 1.1790. Price has settled below 1.1475 (Murray [6/8], 23.6% Fibonacci), opening the door for further declines toward 1.1230 (Murray [4/8], 38.2% Fib) and 1.0986 (Murray [2/8]).
The middle Bollinger Band at 1.1640 is a critical resistance—only a breakout above would bring 1.1963 and 1.2207 back into focus, though this scenario is currently less likely. Bollinger Bands are turning lower, MACD is deep in negative territory, and Stochastic is near oversold but not yet reversing, suggesting any rebound may be limited.
EUR/USD falls as trade and monetary risks mountTrading Strategies
Sell Scenario (Primary):
- Entry: Below 1.1400
- Targets: 1.1230, 1.0986
- Stop-Loss: 1.1530
- Timeframe: 5–7 days
Buy Scenario (Alternative):
- Entry: Above 1.1655
- Targets: 1.1963, 1.2207
- Stop-Loss: 1.1470
Key levels: 1.0986, 1.1230, 1.1640, 1.1963, 1.2207
Conclusion
The EUR/USD pair remains vulnerable as institutional and macroeconomic factors—US-EU trade deals, ECB policy indecision, and robust US data—favor further dollar strength. Only a decisive break above the 1.1640 area could reverse the downtrend in the near term.