EUR/USD price slips below $1.16 as dollar firms on Fed outlook and tariff tensions
EUR/USD retreats below key $1.16 support as dollar strength and tariffs pressure euro
The euro weakened against the U.S. dollar on Thursday, falling below the $1.16 mark for the first time in nearly a month, as a firmer dollar and cautious risk sentiment weighed on the common currency. At the time of writing, EUR/USD trades near 1.1586, extending its retracement from early July highs above 1.1850.
Highlights
- EUR/USD falls to 1.1586 as dollar gains strength on Fed rate outlook
- Eurozone inflation holds steady at 2%; ECB expected to stay on hold next week
- Price tests key support at 1.1550–1.1580 amid broader rising channel
The dollar found renewed strength as markets dialed back expectations of Federal Reserve rate cuts, following hotter-than-expected inflation data and comments from President Trump indicating support for Fed Chair Jerome Powell.
Dollar strength and tariff risk weigh on euro
Beyond monetary policy, geopolitical developments also added pressure to the euro. President Trump announced a 30% tariff on European Union imports, effective next month, although he later indicated openness to negotiate. Markets are cautiously optimistic that a deal could be struck with the EU before August 1, which has temporarily capped downside pressure. The European Union reaffirmed its commitment to pursuing a trade agreement despite the threat of tariffs.
EUR/USD price dynamics (Source: TradingView)
On the data front, eurozone inflation was confirmed at 2% year-on-year in June, while core inflation held steady at 2.3%, keeping pressure on the European Central Bank. The ECB is widely expected to hold rates at its upcoming meeting, but markets still anticipate one 25 basis point cut before year-end.
Key support level under pressure
From a technical perspective, EUR/USD remains within a rising channel structure that has been active since March. The pair is now testing a pivotal demand zone between 1.1550 and 1.1580, aligning with the lower boundary of the channel. A decisive rebound from this area could reignite bullish momentum toward 1.2000–1.2150, but a daily close below 1.1540 would invalidate the bullish structure and expose deeper levels near 1.1200.
Previously, we highlighted EUR/USD’s strong uptrend and resistance at the 1.1850 region. Today’s price action marks a retest of structural support within that broader bullish formation. The coming sessions will determine whether this is a corrective pullback or a structural shift.
