- The euro is benefiting from renewed interest in a trade agreement between the EU and the US.
- The US dollar is holding steady at a lower level following the recent FOMC meeting.
- The EUR/USD pair is stuck in a downward channel beneath the 1.1750 resistance line.
The EUR/USD pair saw gains on Thursday but pulled back from its intraday highs. There are ongoing investor concerns, particularly due to uncertainty surrounding the global trade outlook. Despite some risk appetite, the USD remains somewhat under pressure after the Fed’s latest minutes, which continue to lend support to the euro.
The euro encountered buying interest just below 1.1700 on Wednesday. As the pair trades at 1.1740, it has managed to recover some losses, retreating to the midrange around 1.1700. Still, there’s a bearish sentiment stemming from July 1st highs.
In other news, positive reports have emerged regarding trade negotiations between the EU and the US. Markets are optimistic that the EU might avoid a baseline 10% tariff. US President Trump acknowledged the EU’s constructive approach, and European trade chief Maros Sevkovic indicated an announcement on the trade deal could come soon.
The Federal Reserve’s last meeting minutes showed that many members are in favor of a cautious approach in upcoming months. A strong auction of US Treasury bonds also eased bullish momentum for the dollar.
Earlier Thursday, German Consumer Price Index (CPI) data showed monthly inflation remained flat. In the US, the release of weekly unemployment claims is eagerly anticipated as it offers more insight into the job market’s health.
Daily Digest Market Movers: Euros advance as trade fears ease
- The euro has found support from market reactions to Trump’s recent tariffs and growing faith that EU-US trade relations could improve. Both sides express optimism with the August 1 deadline approaching. This investor confidence may keep supporting the euro.
- Wednesday’s FOMC minutes highlighted differing views among committee members, with many expecting at least one rate cut this year.
- The Fed raised expectations for potential interest rate cuts in September, with CME Group’s FED Watch Tool showing a 72% probability of a 25 bps reduction, up from less than 65% prior to the minutes release. The likelihood of a cut in July remains around 6%.
- US Treasury yields fell on Wednesday, with the 10-year benchmark yield dropping about 10 basis points from Tuesday’s highs after a $39 billion auction.
- In the eurozone, German CPI data confirmed that inflation stagnated in June compared to May, with annual rates easing towards the ECB’s 2% target, impacting the euro slightly negatively.
EUR/USD remains trapped within the downward channel
The EUR/USD pair, having peaked on July 1st, is currently constrained beneath the downtrend resistance near 1.1760. This has created a wedge pattern typical of emotional markets.
If the price can break above, the highs from July 4th and 7th at 1.1790 could challenge the bulls, aiming for a multi-year peak of 1.1830.
The 4-hour RSI hovers around the 50 level while the pair searches for direction. The 1.1680 zone is significant; it corresponds with the 38.2% Fibonacci retracement of the rally from June 24th to July 1st, intersecting with lows from July 7th.
A bearish move below this level could heighten pressure in the 1.1630-1.1645 range, where previous highs coincide with the 50% Fibonacci retracement of the late June rally.
