EUR/USD extends losses toward 1.1650 after EU-US trade deal

EUR/USD remains under strong bearish pressure and declines to the 1.1650 area on Monday. The Euro struggles to find demand as markets reassess the ECB outlook after the EU and the US reached a trade deal. Meanwhile, the broad-based USD strength further weighs on the pair.

EUR/USD Technical Overview

The Relative Strength Index (RSI) indicator on the 4-hour chart dropped below 40 and EUR/USD closed the last 4-hour candle below the 100-period Simple Moving Average (SMA), reflecting a buildup of bearish momentum.

On the downside, 1.1660-1.1650 (200-period SMA, Fibonacci 23.6% retracement of the latest uptrend) aligns as the next support area before 1.1600 (static level, round level) and 1.1540 (Fibonacci 38.2% retracement).

Looking north, resistance levels could be spotted at 1.1700 (static level, round level, 100-period SMA), 1.1760 (static level) and 1.1800 (static level, round level).

Fundamental Overview

The European Union (EU) and the United States (US) announced over the weekend that they have reached a framework trade agreement that sets a blanket 15% tariff on goods traded between them. European Commission President Ursula von der Leyen said on Sunday that they will not impose retaliatory tariffs and added that they pledged $600 billion in investment in the US on top of existing expenditures.

Despite this development, the Euro struggles to find demand in the early European session on Monday as investors reassess the European Central Bank's (ECB) policy outlook. According to Reuters, markets are currently pricing in a 65% chance of a 25 basis points cut in the ECB's key rates by December.

On the flip side, the US Dollar (USD) stays resilient against its rivals on improving prospects for the US economic outlook. In addition to the trade deal with the EU, news suggesting that the US and China are looking to extend their tariff truce by another three months help the USD hold its ground.

The economic calendar will not feature any high-impact data releases on Monday. Later in the week, the Federal Reserve (Fed) will announce monetary policy decisions and Gross Domestic Product (GDP) data from both the Eurozone and the US will be watched closely by market participants.

Investors could refrain from taking large positions ahead of these key events but the current market atmosphere could make it difficult for EUR/USD to stage a decisive rebound.