EUR/USD: Bulls face a minor hurdle at 1.1700

Further upside momentum in the Greenback kept the risk complex under pressure and motivated EUR/USD to retreat for the second consecutive day on Monday, briefly revisiting the sub-1.1600 region as investors geared up for the US CPI data due on Tuesday and assessed the 90-day extension of the US-China trade truce.

EUR/USD Technical Overview

Resistance is at the weekly high of 1.1788 (July 24), ahead of the 2025 ceiling of 1.1830 (July 1) and the September 2021 top at 1.1909 (September 3), all preceding the psychological 1.2000 mark.

On the other hand, support starts at the August low of 1.1391 (August 1), backed by the interim 100-day SMA, and prior to the weekly floor at 1.1210 (May 29).

Momentum signals are mixed: the Relative Strength Index (RSI) has fallen below the 50 threshold, indicating potential for further losses, while an Average Directional Index (ADX) near 17 suggests a still indecisive trend.

Outlook: Consolidation mode

EUR/USD looks set to continue trading within familiar ranges unless the Fed springs a dovish surprise or trade tensions alleviate markedly, with the mood around the Greenback likely driving the next meaningful move.

Fundamental Overview

The Euro (EUR) lost further momentum in quite a negative start to the new trading week, motivating EUR/USD to deflate below the 1.1600 support, hitting three-day troughs and flirting with its transitory 55-day SMA.

The US Dollar (USD), in the meantime, rose markedly, adding to Friday’s recovery as market participants geared up for the upcoming release of US inflation figures tracked by the Consumer Price Index (CPI) on Tuesday.  In addition, the US-China trade deadline also kicks in on Tuesday, adding to the generalised caution in the risk-associated universe.

Trade deal optimism evaporates quickly

The initial relief over the freshly signed US–EU accord—reducing most European export tariffs to 15% from the once-threatened 30%—has faded fast. Aerospace, semiconductor, and agricultural goods escaped the new duties, but steel and aluminium remain taxed at 50%. In return, Europe committed to buying $750 billion worth of US energy, boosting defence orders, and funnelling more than $600 billion into American investments.

Berlin and Paris were quick to voice scepticism: German Chancellor Friedrich Merz warned the deal would squeeze an already fragile manufacturing sector, while French President Emmanuel Macron branded it a “dark day” for the Continent.

Two tariff flashpoints

Trade politics continue to dominate the market. On August 7, President Trump’s “reciprocal” tariffs on imports from 69 partners took effect, lifting duties to between 10% and 41% within a week, alongside threats of stiffer measures against Russia should the Ukraine conflict persist.

By August 12, he must decide whether to extend the tariff truce with Beijing or allow levies to snap back to triple-digit levels—risking the return of a full-scale trade war.

Central banks: Keeping their powder dry

The Federal Reserve (Fed) left policy unchanged at its latest meeting, with Chair Jerome Powell striking a cautious tone despite dissent from Governors Waller and Bowman.

Over in Frankfurt, ECB President Christine Lagarde called growth “solid, if a little better”, yet money markets have already pushed expectations for a first rate cut out to spring 2026.

Speculators ease off the Euro

Speculators trimmed their net longs to five-week lows near 116K contracts, while commercial players also reduced their net shorts to about 163.5K contracts, or multi-week lows. Furthermore, open interest deflated to a four-week low of around 828.3K contracts.