EUR/USD trades quietly below 1.1700 as investors await fresh cues on US-EU trade talks

The EUR/USD pair trades calmly around 1.1670 during the Asian trading session on Tuesday. The major currency pair oscillates in a limited range, with investors awaiting fresh development on trade negotiations between the United States and the European Union.

EUR/USD Technical Overview

Resistance lines up at the 2025 high of 1.1830 (July 1), ahead of the June peak at 1.1852 (June 2018).

On the flip side, interim contention sits at the 55-day simple moving average (SMA) at 1.1457, prior to the weekly trough at 1.1210 (May 29) and the May base at 1.1064 (May 12), all preceding the key 1.1000 threshold.

Indicators of momentum still point to a strong Euro. The Relative Strength Index (RSI) is close to 55, which means the market is bullish. The Average Directional Index (ADX) hovers around 28, indicating quite a healthy trend.

Medium-term outlook

The view that the Fed might reduce its rates later in the year vs. a potential pause by the ECB could lend some fresh legs to the European currency and propel EUR/USD higher. However, ongoing trade tensions and the uncertainty surrounding President Trump's tariff proposals pose significant risks that could prevent prices from rising further in the near future.

Fundamental Overview

The Euro (EUR) dropped to its lowest point against the US Dollar (USD) in three weeks in quite a bearish start to the week, motivating EUR/USD to trade in the red for the fourth day in a row and revisit the area of 1.1650.

Trade jitters reignite

The White House said it would wait until August 1 to look at tariffs again.

However, the recent threats of 30% levies on US imports from the European Union added to last week’s announcements of tariffs on Japan and South Korea by 25% and on copper by 50%, all contributing to the resurgence of a potential trade war.

Central banks diverge

The Minutes from the Federal Reserve's (Fed) June meeting showed that some members wanted to lower interest rates right away, while others wanted to wait and see how tariffs may affect inflation.

Futures markets are still expecting some easing later this year, but only if the price pressures don't last long.

The European Central Bank (ECB) reduced its Deposit Facility Rate to 2.00% in early June. President Christine Lagarde said that any move would be contingent on compelling evidence of weak external demand, implying that there is little interest in decreasing rates in the near future.

Bullish bets on the EUR pile up

According to CFTC data through July 8, speculative net longs in the single currency have reached over 120.5K contracts, the biggest level since December 2023, while institutional traders have increased their net shorts to over 177K contracts, or multi-month highs. During that period, open interest has also gone up for the third week in a row, this time to around 806K contracts.