EUR/USD price struggles near $1.11 as U.S.-China trade truce boosts dollar
EUR/USD shows indecision as the U.S.-China trade truce lifts U.S. dollar strength
EUR/USD remains under pressure near the 1.11 level, struggling to maintain upward momentum after a significant decline. The U.S. dollar is gaining strength following the U.S.-China trade truce, which has led to a reduction in tariffs between the two largest economies.
The temporary reduction of tariffs—from 145% to 30% on U.S. imports and 125% to 10% on Chinese imports—has alleviated some fears of prolonged trade tensions. The U.S. Dollar Index (DXY) has rallied in response, reflecting improved market sentiment.
This trade breakthrough has led to a pullback in EUR/USD, as the euro weakens against the dollar. The dollar’s strength is further supported by expectations that the trade deal will help curb inflation in the U.S., with market participants anticipating that the Federal Reserve may revise its interest rate outlook due to reduced trade-induced inflationary pressures. The situation has prompted many analysts to expect a shift in monetary policy as the risk of inflation rises less sharply.
EUR/USD price dynamics (October 2024 - May 2025) Source: TradingView.
ECB signals mixed future policy while global trade outlook improves
While the U.S. dollar strengthens, the European Central Bank (ECB) has offered mixed signals regarding its future monetary policy. ECB board member Isabel Schnabel has indicated that the central bank sees no immediate need for further interest rate cuts, citing the risk of inflation exceeding the ECB’s 2% target.
However, the broader market sentiment continues to predict that the ECB will ease monetary policy further to support the Eurozone economy, particularly in light of the ongoing trade tensions.
Outlook and technical levels for EUR/USD
As EUR/USD faces selling pressure, traders are awaiting the U.S. Consumer Price Index (CPI) release, which could provide further insight into inflation trends and the Fed’s potential actions. The Eurozone’s economic outlook remains in focus, with some ECB officials signaling the possibility of further rate cuts. Technically, EUR/USD remains trapped in a range between 1.1076 and 1.1123, with 1.1200–1.1250 serving as resistance. The support near 1.1076 continues to be crucial for any potential rebound.
Key support for EUR/USD remains at 1.1076. A break below this level could trigger further declines toward 1.09191, while resistance near 1.1150–1.1200 remains significant. If EUR/USD can break through resistance, a move toward 1.13 and 1.13535 could be possible, but failure to hold support could lead to renewed downside pressure toward 1.08.
As previously discussed U.S. dollar continues to benefit from stronger-than-expected economic growth and potential shifts in Federal Reserve policy, while the ECB is still navigating inflation risks and economic recovery challenges.
