EUR/USD Price Forecast: Trade deals ignite US Dollar demand

EUR/USD Current price: 1.1658

• The United States and the European Union announced a trade deal.
• The week will be packed with first-tier events, including the Federal Reserve’s decision.
• EUR/USD shed over 100 pips from its intraday peak, with lower lows in sight.

The US Dollar (USD) gapped lower at the weekly opening amid optimism fueling demand for high-yielding assets, following news that the United States (US) and the European Union (EU) reached a trade deal.

The US and the EU agreed a 15% tariff on most European goods entering the US, much higher than the average 4.8% exporters face these days. No rates will apply to EU exports in important sectors, including aircraft parts, some chemicals, semiconductor equipment and some agricultural products.

The EU response to the headline was uneven. European Central Bank (ECB) policymaker Peter Kazimir said on Monday that the trade deal reduces uncertainty, but it is unclear for now how it impacts inflation. However, the French prime minister, François Bayrou, said the EU has capitulated to Donald Trump’s threats, adding it is a “dark day” for the EU. The trade focus now shifts to the US-China as officials from both countries resume talks in Stockholm.

The EUR/USD pair peaked at 1.1771 during Asian trading hours, but changed course early in Europe, with the USD surging across the FX board, resulting in the pair shedding over 100 pips.

The macroeconomic calendar had nothing relevant to offer at the beginning of the week, but will be flooded with first-tier releases, including US employment-related data ahead of the Nonfarm Payrolls report on Friday, the preliminary estimates of the Q2 Gross Domestic Product (GDP) for the US and the EU, and inflation updates. On top of that, the Federal Reserve (Fed) will announce its decision on monetary policy on Wednesday.

EUR/USD short-term technical outlook

From a technical point of view, the daily chart for the EUR/USD pair shows that the risk of additional slides has increased. The pair broke below its 20 Simple Moving Average (SMA), which provided dynamic support last week, now acting as resistance at around 1.1705. The 100 SMA, in the meantime, maintains its upward slope over 300 pips below the current level, while technical indicators aim firmly lower at around their midlines.

The 4-hour chart shows EUR/USD pared its slide after nearing oversold conditions, with the pair falling below its 20 and 100 SMAs, while currently struggling with the 200 SMA. Finally, technical indicators maintain their downward slopes near oversold readings, skewing the risk to the downside.

Support levels: 1.1640 1.1600 1.1555

Resistance levels: 1.1695 1.1740 1.1785

EUR/USD shed over 100 pips from its intraday peak, with lower lows in sight.