15/07/25

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The EUR/USD currency pair has experienced a notable rebound from recent multi-week lows amid easing concerns over escalating trade tensions. Market sentiment remains positive, supported by a broader risk-on environment that diminishes the appeal of the safe-haven US dollar. Investors are now turning their attention to upcoming US economic data, particularly the Consumer Price Index (CPI), which is expected to provide insight into Federal Reserve policy prospects.

Earlier in the week, the EUR/USD pair declined sharply following heightened fears of a trade war escalation when US President Donald Trump announced a potential 30% tariff on European Union imports, scheduled to commence August 1. In response, European leaders signaled ongoing efforts to negotiate an agreement with Washington before any retaliatory measures are implemented. Despite initial threats, there has been a shift in narratives as Trump has indicated a willingness to engage in trade discussions, suggesting that a broader trade conflict might be avoided. Such developments buoyed the euro and lifted risk sentiment globally, simultaneously pulling the US dollar away from its recent peak levels.

Market positioning appears to be adjusting ahead of the key CPI release, which is regarded as a crucial factor in determining the path of US monetary policy. Expectations for the upcoming data are mixed, with many traders still considering the likelihood of a rate cut by the Federal Reserve by September. A softer inflation report could reinforce market expectations for an early easing cycle, potentially weakening the dollar further. Conversely, a stronger CPI reading might boost the dollar temporarily, although the European Central Bank remains committed to maintaining its current accommodative stance, with no imminent plans to alter interest rates at its upcoming meeting.

Technically, the EUR/USD pair has recently broken below the 100-period simple moving average on the four-hour chart — a first since late May — and some oscillators indicate negative momentum. Nonetheless, momentum indicators like the daily RSI remain above 50, and the MACD still points toward bullish conditions. Immediate resistance is seen near the 1.1740-1.1745 zone, with the potential to advance toward the 1.1800 level and even challenge recent highs around 1.1830. On the downside, support levels around 1.1655-1.1660 are critical, with further declines possibly prompting a test of the 1.1600 level and deeper losses towards 1.1500 if this support is convincingly broken.