Euro Steady but Trade and ECB Risks Persist

Key Takeaways:

*ECB remains cautious as inflation lingers and trade risks mount.

*U.S. tariff deal caps damage, but sectoral strains persist.

*EUR stays range-bound with downside risk if Fed stays hawkish.

Market Summary:

The euro remained range-bound near the $1.14–1.16 corridor as markets digested the broader implications of the EU’s new trade arrangement with the United States. While the bloc avoided a more severe escalation in tariffs—settling on a 15% baseline for 70% of affected goods—concerns persist over Europe’s competitive positioning, particularly in the auto and agriculture sectors. France’s strong rebuke of the deal as “submission” reflects unease within the eurozone about structural imbalances that the agreement may exacerbate.

Economic data offers mixed signals. Germany’s July CPI came in at 2.0% year-on-year, while core inflation across the eurozone held at 2.7%, underscoring persistent service-sector price pressures that complicate the European Central Bank’s (ECB) path forward. At the same time, eurozone unemployment remains historically low at 5.9%, suggesting pockets of domestic resilience.

Monetary policy expectations continue to anchor the euro. Markets are pricing in one final 25bp cut from the ECB, possibly in September, but fiscal stimulus out of Berlin and a modest Q2 GDP gain (+0.1%) have softened the urgency for further easing. ECB President Christine Lagarde has reaffirmed a data-dependent approach amid a fragile global trade environment and volatile energy prices.

For now, the single currency remains caught between supportive domestic fundamentals and external headwinds. A clean break below $1.1340 (June low) would likely require a renewed risk-off shift or a sharp re-acceleration of U.S. economic outperformance.

Technical Analysis 

EURUSD, H4

EUR/USD remains under heavy selling pressure, trading near 1.1417 after decisively breaking below the 1.1588 support level. The sharp breakdown followed a bearish rejection at the 1.1690 zone and was exacerbated by a failure to hold above the former ascending trendline support , which has now turned into resistance. Price action is consolidating near recent lows, with bears firmly in control and downside momentum intact.

Momentum indicators suggest continued bearish bias. The Relative Strength Index (RSI) is hovering around 29, deep in oversold territory, indicating strong downside momentum but also hinting at potential exhaustion in the near term. The MACD remains firmly negative, with the signal line spread widening and histogram bars deepening below the zero line, further validating the bearish trend.

Overall, EUR/USD maintains a bearish structure below 1.1588, with immediate resistance now at 1.1454 and stronger resistance at 1.1588. A continued move lower could target the next key support near 1.1318. However, any rebound above 1.1454 may signal a short-term relief rally, though broader trend bias remains to the downside unless price reclaims levels above 1.1588.

Resistance Level: 1.1454, 1.1588

Support Levels: 1.1318, 1.1245