- The EUR/USD outlook points to improved sentiment in the Eurozone.
- Trump announced that he would impose a 30% tariff on Eurozone goods.
- Traders are keeping an eye on the US CPI report.
The EUR/USD outlook points to improved sentiment in the Eurozone after Trump said he was willing to negotiate a trade deal. As a result, the euro recovered after dropping on fears of a 30% reciprocal tariff on the EU. Meanwhile, market participants are anticipating the US CPI report for clues on Fed rate cuts.
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Over the weekend, Trump announced that he would impose a 30% tariff on Eurozone goods come August 1st. The news dashed hopes of a looming trade deal between the two partners, leading to a drop in the euro. Initially, market participants were hopeful of a deal since Trump failed to send letters to the EU and Mexico. However, that changed.
Meanwhile, the EU has accused the US of resisting efforts to reach an agreement. As a result, top officials have said they will retaliate if tariffs take effect in August. This has raised tensions between the trade partners. However, market participants are still hoping for a deal before August. Trump has welcomed EU officials to continue with negotiations.
Meanwhile, traders are keeping an eye on the US CPI report, due later in the day. Hotter-than-expected figures will confirm the impact of Trump’s tariffs on price pressure, easing Fed rate cut bets.
EUR/USD key events today
- US core CPI m/m
- US CPI m/m
- US CPI y/y
EUR/USD technical outlook: Trapped between 30-SMA & support trendline
On the technical side, the EUR/USD price has paused near its bullish trendline, which has acted as a strong support many times before. Despite a bounce, the price still trades below the 30-SMA, with the RSI under 50, supporting a bearish bias. Since bears took over at the previous peak, the price has traded below the SMA, respecting it as resistance.
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Therefore, this may happen again. However, this time the price is caught between the SMA and the trendline. If bears are unable to break below the trendline, the price will likely break above the 30-SMA. Such a move would signal a shift in sentiment, allowing bulls to retest the 1.1800 key resistance level.
On the other hand, if the price breaks below the trendline and the 0.5 Fib retracement, it will signal a likely reversal, allowing bears to target the 1.1450 support level.
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Saqib Iqbal
