EUR/USD Forecast: Slides Ahead of Trump-Zelensky Meeting

• The EUR/USD forecast indicates a pullback in the euro at the start of the week.

• Trump met Russia’s Putin on Friday and said the leader is more willing to work on a peace deal.

• The dollar recovered as Fed rate cut bets eased.

The EUR/USD forecast indicates a pullback in the euro as market participants anticipate the meeting between Trump and Ukraine’s Zelensky. At the same time, the dollar recovered slightly as Fed rate cut bets eased after more data last week. 

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Trump met Russia’s Putin on Friday and said the leader is more willing to work on a peace deal rather than a ceasefire deal. However, Ukraine has to agree to Russia’s terms. Trump will meet Zelensky on Monday to try and convince him to agree to Russia’s terms and work to end the war. A peace deal would boost the euro. However, the opposite might weaken the currency. 

Meanwhile, the dollar recovered as Fed rate cut bets eased. Data last week revealed a surge in wholesale inflation and solid sales, erasing bets of a massive cut in September.

“While the data don’t all point in the same direction, the US economy looks to be in okay shape in the third quarter,” said Bill Adams, chief economist at Comerica Bank.

“The Fed is likely to cut interest rates by year-end, either in September, when markets now price in a cut, or a few months later, when Comerica forecasts a cut.”

EUR/USD key events today

Market participants do not expect key releases from the US or the Eurozone. Therefore, they will focus on geopolitical developments.

EUR/USD technical forecast: Weak momentum in bullish channel

On the technical side, the EUR/USD price trades above the 30-SMA, with the RSI above 50, suggesting a bullish bias. At the same time, the price trades within a bullish channel, respecting clear support and resistance lines. Bulls have made higher highs and lows within the channel. 

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However, since bulls broke above the SMA, they have failed to respect it as support. This means the price has punctured the line several times, showing bears are strong. At the same time, while the price has made higher highs, the RSI has made lower ones, indicating a bearish divergence. This shows that bulls have lost the enthusiasm to reach new highs. 

Therefore, bears might try to breach the SMA again. Additionally, if momentum surges, the price might break out of the channel to retest the 1.1550 support level.

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