EUR/USD Extends Gains on Dollar Weakness Despite Eurozone Headwinds

Key Takeaways:

*EUR/USD continues bullish momentum amid broad dollar depreciation.

*US tariff threat looms as EU prepares countermeasures.

*ECB rate decision in focus; no immediate policy shift expected.

Market Summary:

The EUR/USD pair has extended its bullish momentum, driven primarily by continued weakness in the US dollar. Market sentiment around the greenback has deteriorated, with expectations for future Federal Reserve rate cuts weighing on yields and reducing demand for the dollar.

On the Eurozone front, however, the backdrop remains fundamentally fragile. The European Union is preparing for a potential escalation in trade tensions with the United States, as a new wave of tariffs is set to take effect on August 1. Ongoing negotiations have entered a crucial phase, with EU officials conducting talks from Brussels, although no direct meetings with US counterparts have been confirmed.

If talks fail, the US may proceed with implementing up to 30% tariffs on European goods. In response, the EU has readied countermeasures, including levies on US digital services and aerospace exports, raising the risk of a trade confrontation.

Attention also shifts to the upcoming European Central Bank (ECB) monetary policy decision on Thursday. While no immediate change in interest rates is anticipated, the market will closely monitor the ECB’s statement and press conference for signals on inflation expectations, economic risks, and potential monetary policy adjustments later in the year.

Technical Analysis 

EUR/USD, H1

EUR/USD remains in a short-term uptrend and is currently testing a key resistance level near 1.1750. A confirmed breakout above this level would reinforce the pair’s bullish structure, potentially opening room for a rally toward the next resistance at 1.1810.

However, momentum indicators are showing early signs of exhaustion. The MACD suggests emerging bearish momentum, while the RSI, currently at 62, has pulled back from overbought territory. This suggests that the pair may be vulnerable to a short-term correction.

Should EUR/USD fail to break and hold above 1.1750, downside pressure could return, with initial support located at 1.1695, followed by stronger demand near 1.1640.

Resistance Levels: 1.1750, 1.1810
Support Levels: 1.1695, 1.1640