The EUR/USD pair slipped sharply to a one-month low of 1.1100 on Monday, driven by a surge in demand for the U.S. dollar following a surprise tariff-cut agreement between the United States and China. Investors reacted swiftly to news that both nations had agreed to a 115% reduction in tariffs and a 90-day freeze on additional trade measures.
In a press conference from Geneva, U.S. Treasury Secretary Scott Bessent confirmed the temporary deal, describing talks as “positive and constructive.” The development relieved trade tensions that had pressured global markets for months and spurred a rally in dollar-denominated assets.
The U.S. Dollar Index (DXY) advanced over 1% to 101.50, marking a four-week high. This broad-based strength weighed heavily on the euro, dragging the pair further into bearish territory.
Technicals Point to Extended Downside
The Relative Strength Index (RSI) on the four-hour EUR/USD chart fell below 30, signaling oversold conditions. However, the fundamental catalyst from the U.S.-China agreement appears to be overshadowing technical signals.
Key support and resistance levels to monitor:
- Support:
- 1.1080 – 50-day Simple Moving Average (SMA), Fibonacci 61.8% retracement
- 1.1000 – Round number, static level
- 1.0950 – Fibonacci 78.6% retracement
- Resistance:
- 1.1170 – Fibonacci 50% retracement
- 1.1200 – 200-period SMA
- 1.1270 – Fibonacci 38.2% retracement
Until a reversal signal gains momentum, traders may avoid long positions, especially with the dollar’s bullish momentum persisting across markets.
U.S. CPI Data Looms as Next Driver
With no high-impact eurozone or U.S. data due later Monday, the focus shifts to Tuesday’s U.S. Consumer Price Index (CPI) report. The Bureau of Labor Statistics is set to release the inflation data, which may influence the Federal Reserve’s interest rate outlook.
Market expectations indicate a limited CPI impact, unless inflation deviates significantly from consensus. Traders believe the Fed’s emphasis has shifted toward long-term consumer expectations, influenced more by geopolitical developments than short-term pricing.
Still, any CPI surprise could reinforce or challenge the dollar’s current uptrend. Until then, EUR/USD is likely to remain subdued, tracking global risk sentiment and policy headlines.
Would you like a post-CPI update on the EUR/USD technical and fundamental outlook?