EUR/USD remains under pressure with Fed's Powell on focus

EUR/USD holds losses for the second consecutive day on Tuesday, trading right below 1.1560 after having retested two-month lows at 1.1542 earlier on the day. A risk-off mood on concerns of a Sino-US trade war is keeping the safe-haven US Dollar buoyed, with all eyes on the Federal Reserve's (Fed) chairman Jerome Powell's conference.

News that China and the United States have raised their fees on each other's vessels has reactivated concerns about a trade war between the world's two major economies on Tuesday. This has dampened previous hopes of a de-escalation, following US Treasury Secretary Scot Bessent's announcement on Monday of an upcoming meeting between US President Donald Trump and his Chinese counterpart, Xi Jinping.

In Germany, the ZEW Economic Sentiment Index has shown a moderate im¡provement in October, but is still short of the market expectations, while the sentiment about the current economic situation deteriorated to its lowest levels since May. Somewhat earlier, Destatis figures confirmed that German consumer inflation accelerated to 2.4% in September from 2.2% in August, in line with the preliminary reading. The Euro (EUR) edges lower following the data release.

The US economic docket remains thin, amid a data blackout from the US federal government. Still, Federal Reserve (Fed) Chairman Jerome Powell will speak later today. However, in the absence of hard data to contextualize his comments, he is unlikely to alter market expectations of two interest rate cuts by the central bank in the next two meetings.

Daily digest market movers: The US Dollar appreciates amid trade war fears

• Market hopes that US President Trump's softer tone towards China would lead to a new de-escalation of the trade rift have been crushed by news that China has started charging higher fees to US cargo vessels, in a move that will be responded to in the US, opening a new front in trade hostilities.
• Apart from that, Chinese authorities have dampened tensions between the two countries, as Beijing accused the US of having "double standards" and the commerce ministry affirmed that the US cannot seek dialogue, while threatening new measures.
• All this stems from China's decision to impose restrictions on rare earth exports to Western countries announced last week, which was responded to by Trump with a threat of 100% levies on Chinese imports effective on November 1, which rattled financial markets and sent the US Dollar tumbling last Friday.
• On the macroeconomic front, October's German ZEW Economic Sentiment Index improved to 39.3 from 37.3 in September, but the Current Situation Index dropped to -80.0 from -76.4, against market expectations of a mild improvement to -75. The Eurozone Economic Sentiment declined to 22.7 from 26.1 against expectations of an improvement to 30.2.
• Earlier on Tuesday, German Consumer Prices Index (CPI) data showed a 0.2% increase in September and a 2.4% year-on-year growth, accelerating from 0.1% and 2.2%, respectively, in August. The Harmonized Index of Consumer Prices (HICP) has revealed the same figures.
• Later on the day, the German ZEW Economic Sentiment Index is expected to show a moderate improvement, yet with the gauge measuring the current economic situation steady at historically low levels.

Technical Analysis: EUR/USD is under bearish pressure below 1.1600

EUR/USD remains on its back foot after failing to regain the 1.1600 level on Monday. Technical indicators in the 4-hour chart highlight the bearish momentum, with the Relative Strength Index (RSI) capped below the 50 level and the Moving Average Convergence Divergence (MACD) about to cross below the signal line.

Support at Monday's low of 1.1542 is holding bears for now, but it remains under pressure as upside attempts keep finding sellers. Further down, the August 5 low, at 1.1530, and the base of the descending channel, in the area of 1.1525, will come into focus.

To the upside, the intraday high is at 1.1590, ahead of Monday's peak of 1.1630. Further up, the top of the descending channel comes at the 1.1680 area.