Market Overview: Euro Gains as Trade Hopes Persist
- The euro seems to be recovering from previous losses, buoyed by ongoing optimism about a trade agreement between the EU and the US.
- Investors are keen on finalizing a trade deal by the August 1 deadline.
- Currently, the EUR/USD is facing resistance at 1.1700, continuing its overarching bearish trend.
The EUR/USD pair saw a mild rebound during the early European sessions on Monday, marking its first upward movement in four days. This comes despite President Donald Trump’s recent announcement of a 30% tax on all EU goods, which continues to dampen market sentiment.
While the Euro (EUR) rose from a three-week low of 1.1655, it remains tightly bound around the 1.1700 mark. If you look back to the start of the month, the pair has been trending downward since hitting 1.1830 on July 1, which was its highest in nearly four years.
The market is opening with a muted risk-off sentiment, prompted by the new tariffs from Trump. Interestingly, the response this time seems to be more strategic than panicked, suggesting many traders view it as part of a negotiation rather than a final stance.
European officials are keeping a hopeful outlook on the trade discussions with the US, aiming for a resolution before the August deadline. They have delayed imposing retaliatory tariffs, with EU Trade Commissioner Maros Sevkovic expressing confidence in reaching a favorable agreement.
The economic calendar is relatively quiet on Monday, but the Euro Group Conference and a speech by the European Central Bank (ECB) could influence the Euro later in the day. Attention will then shift to the US consumer price index (CPI) data scheduled for release on Tuesday, which could provide insights into the Federal Reserve’s future decisions.
Daily Digest: Euro’s Trade Agreement Hopes Continue
- The Euro is rising, driven by sustained hopes for a trade deal between the EU and the US. EU officials indicated they would extend negotiations and focus on reaching an agreeable conclusion.
- On Friday, ECB board member Fabio Panetta emphasized the need for central banks to maintain an accommodative monetary policy in light of potential inflation issues.
- Chicago Federal Reserve President Austan Goolsbee cautioned that Trump’s tariffs complicate the inflation outlook and pose challenges for desired interest rate cuts.
- Despite these warnings, Trump has pressured the Fed Chairman, suggesting that it would be beneficial if Powell resigned, a sentiment echoed by economic advisor Kevin Hassett.
EUR/USD Shows Limited Upside Potential
The EUR/USD has shown some recovery from its recent lows but is still capped around 1.1700. The downtrend established since July 1 remains intact, despite brief attempts to rise, which face ongoing limitations.
The technical indicators suggest a bearish sentiment persists, although the relative strength index indicates it’s still above the oversold level, implying the potential for further depreciation.
Bears haven’t convincingly pushed below the 1.1660 support level, with resistance now forming at 1.1700. If it breaks this level, the bulls might face challenges from a trendline resistance at approximately 1.1730, near the summit of 1.1740 observed on July 10.
