EUR/USD Drops Toward 1.1650 as Trade Deal Boosts Dollar, ECB Outlook Weighs on Euro

Summary:
The EUR/USD pair extends its bearish streak, slipping below key technical levels amid rising US Dollar demand and uncertainty over future ECB policy direction. A recent EU-US trade pact adds pressure to the Euro, while investors await upcoming GDP and Fed rate announcements.

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📉 EUR/USD Technical Outlook: Bearish Momentum Builds Below Key Support

The EUR/USD pair is trading near 1.1650 on Monday, extending last week’s losses as bearish momentum accelerates. The Relative Strength Index (RSI) on the 4-hour chart dipped below 40, and price action has slipped under the 100-period Simple Moving Average (SMA) — both signaling growing downside pressure.

• Support zones to watch:
  • 1.1650–1.1660: Confluence of 200-SMA and 23.6% Fibonacci retracement
  • 1.1600: Psychological round number
  • 1.1540: 38.2% Fibonacci retracement
• Resistance levels to monitor:
  • 1.1700: Static level and 100-SMA
  • 1.1760 and 1.1800: Previous supply zones

If EUR/USD fails to hold above 1.1650, the next leg lower may target the 1.1540 support area.

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🧭 Fundamental Drivers: US Dollar Firms on Trade Optimism, Euro Faces Headwinds

The EU-US trade agreement, announced over the weekend, imposes a 15% blanket tariff on goods traded between the two economies. Despite reducing geopolitical tensions, the deal has boosted demand for the US Dollar and added to bearish sentiment for the Euro.

EU Commission President Ursula von der Leyen confirmed the EU will invest $600 billion into the US, a move seen as supportive of US growth and bullish for the Greenback.

Meanwhile, investor confidence in the European Central Bank (ECB) is fading. Markets now price in a 65% chance of a rate cut by December, according to Reuters. This dovish expectation contrasts with the Fed’s still-cautious tone, keeping the USD in favor.

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🔎 What’s Ahead: Key Events to Watch

With Monday’s calendar light, attention shifts to upcoming major releases:

Tuesday:

• EU GDP (QoQ & YoY) and Retail Sales
• US and Eurozone GDP reports due later in the week
• Federal Reserve policy decision on Wednesday

Until then, traders may remain cautious, but sentiment favors a bearish EUR/USD unless there is a surprise shift in macro data or central bank tone.

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