EUR/USD price gives up early gains as dollar recovers on U.S.-China trade optimism
EUR/USD trading just above 1.1200 as U.S. dollar rebounds
EUR/USD surrendered some of its early gains on Thursday, as the U.S. dollar regained strength following news of further de-escalation in U.S.-China trade tensions. The pair traded just above the 1.12 mark, up 0.2% from its previous close, after showing initial gains earlier in the European session.
The U.S. dollar’s rebound came amid renewed optimism that the trade war between the U.S. and China may continue to ease, particularly following comments from U.S. Treasury Secretary Scott Bessent. His statement that Washington is entering a series of negotiations with China to prevent further escalation bolstered investor confidence.
EUR/USD price dynamics (April 2025 - May 2025) Source: TradingView.
U.S. dollar recovers on trade talks and improving relations with China
Beijing’s decision to roll back non-tariff measures against 45 U.S. entities also lifted the mood surrounding the U.S. dollar. This move, which came in the wake of a 90-day trade truce agreement between the U.S. and China, helped support global economic growth expectations. The softer U.S. dollar prompted buying interest in major currencies, including the euro. However, European markets remained wary of the ongoing trade talks between the EU and the U.S., with Germany’s Finance Minister Lars Klingbeil stating that the EU is prepared with countermeasures in case negotiations fail.
On the economic front, the Eurozone’s GDP data revealed a slower-than-expected growth rate of 0.3% for the first quarter, down from the prior release of 0.4%. However, year-on-year growth remained steady at 1.2%. Meanwhile, the Employment Change in the first quarter exceeded forecasts, rising by 0.3%, a sign of resilience in the labor market despite the softer GDP data.
Technical outlook: EUR/USD holds key support near 1.12
From a technical perspective, EUR/USD remains above critical support at the 1.1175–1.1185 zone, which previously acted as resistance and is now providing price support. The 30-minute chart shows that the pair has broken a descending trendline resistance, suggesting a potential shift toward bullish momentum. The Relative Strength Index (RSI) is hovering around 50, indicating a lack of strong directional pressure, while the MACD is showing a neutral bias with the signal and MACD lines converging near the zero line.
On the 4-hour chart, the price has started to climb back above key exponential moving averages (EMAs), with the 20-EMA, 50-EMA, and 100-EMA forming a confluence zone around 1.1195–1.1230. A sustained move above this area could open the door to further gains, potentially testing resistance near 1.1250. However, a failure to hold above 1.1175 could signal a retracement toward lower support levels, with the next key level around 1.1130.
As previously discussed, the broader trend for EUR/USD remains cautiously bullish, with the euro finding support on softer U.S. inflation data and the U.S.-China trade truce. Traders are closely monitoring the 1.1215 level for any breakout potential, while the failure to hold above 1.1175 could trigger a deeper pullback toward the lower support region.
