The Euro is currently below 1.1600 as the US Dollar strengthens, mainly due to fears of a trade war prompted by US threats to limit software exports to China. The release of Eurozone Consumer Confidence data is in focus, but market movements are steady, with attention on US inflation and Federal Reserve plans. EUR/USD is trading at 1.1590, slightly lower than its earlier high of 1.1620, reflecting the moderate impact of US-China trade tensions. With no major economic reports during the US government shutdown, trade issues dominate market activity, although there are hopeful expectations for US-China talks.

ECB Speeches and Data Releases

Speeches from the European Central Bank (ECB) and data releases, including the Eurozone’s Consumer Confidence index, are important. US Federal Reserve indicators and remarks from officials will also impact USD movements. The US Dollar is gaining strength due to potential trade restrictions against China, with US leaders showing optimism about resolving trade issues. In Europe, ECB Vice President de Guindos is discussing balanced inflation risks, while markets are waiting for the delayed US CPI report on Friday, predicting an annual inflation rate of 3.1%. Technical analysis shows EUR/USD is hovering above the support level of 1.1580 but faces resistance at 1.1620. The Relative Strength Index (RSI) and MACD indicate negative momentum, suggesting possible downside targets of 1.1545 and 1.1455, while resistance levels to watch for potential gains are 1.1625, 1.1650, and 1.1728.

Dollar Strength and Trade Fears

The EUR/USD pair is struggling to stay above the 1.1600 level due to a stronger US Dollar. This dollar strength stems from renewed fears over US-China trade relations, a familiar situation. The market is quiet, but there is anticipation for US inflation data and insights from the Federal Reserve. The upcoming Eurozone Consumer Confidence report is not expected to provide much support for the Euro. Historically, confidence levels have been low, often around the -15 mark since the post-pandemic recovery slowed in 2023. Another weak report will underscore the economic challenges in the Eurozone. Increased threats of US export restrictions to China have made the dollar a favored investment. This situation mirrors the uncertainty experienced during the trade disputes of 2018-2019 when the dollar benefited amid ongoing tensions. Even with discussions ongoing, the risk of escalation is directing investment toward US assets. Attention is fixed on the upcoming US Consumer Price Index (CPI) report, which is expected to show persistent inflation. After struggling to reduce inflation from the 9% highs seen in 2022, a reading near 3.1% may complicate the Federal Reserve’s decisions regarding interest rates. While there are hopes for a rate cut, these inflation figures make such a move challenging for the central bank. With current market volatility being low, derivative pricing is relatively inexpensive. This offers an opportunity for traders anticipating a downward shift in EUR/USD. Buying put options on the Euro could benefit from a decline while limiting risk to the premium paid. Based on the technical outlook, breaking below the support level of 1.1580 could trigger significant movement. Traders might consider options or put spreads to target lower levels such as 1.1545 or the channel bottom around 1.1455. This approach provides a defined-risk strategy that aligns with the prevailing bearish sentiment. Create your live VT Markets account and start trading now.

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