The EUR/USD pair is experiencing a decline for the fourth consecutive session, approaching the 1.1532 level. Investor sentiment is currently characterized by caution as markets process recent trade developments and prepare for an influx of significant economic data. Over the weekend, the White House revealed a reduction in trade tensions with China. Beijing has consented to halt further export limitations on rare earth metals and conclude inquiries into US semiconductor firms. The US will, in exchange, implement a freeze on specific existing tariffs and revoke the proposed 100% increase in tariffs on Chinese exports. This decision comes in the wake of last week’s summit between Donald Trump and Xi Jinping, which sought to stabilise bilateral relations.
Meanwhile, the ongoing US government shutdown persists in postponing the publication of essential official statistics, particularly employment data. In their absence, market participants will look to private-sector indicators set to be released in the coming days, such as the ADP employment report, the ISM Services PMI, and the University of Michigan Consumer Sentiment Index. This follows the anticipated 25-basis-point rate cut by the Federal Reserve last week. Chair Jerome Powell adopted a measured approach, highlighting that a subsequent cut in December is not guaranteed – a statement that has reinforced the US dollar’s strength.
The EUR/USD currency pair has established a narrow consolidation range centered at 1.1569. A subsequent downward breakout has finalized a bearish wave to 1.1521, and the pair is currently consolidating above this local low. A technical rebound to retest 1.1569 from below appears to be a potential scenario. Nonetheless, given the prevailing bearish momentum, we expect a continued decline towards 1.1500 after any potential pullback. The overarching objective for this maneuver is 1.1488, identified as the initial phase of the third and generally most robust wave within the ongoing downtrend. The MACD indicator supports this perspective, as its signal line is situated below zero and is trending downward, indicating ongoing selling pressure.
The pair experienced a downward breakout from a consolidation range near 1.1566, successfully reaching its first target at 1.1495. Upon reaching this level, a corrective bounce to 1.1533 is anticipated prior to the continuation of the downtrend towards 1.1468. This scenario is reinforced by the Stochastic oscillator, with its signal line positioned below 50 and steadily declining towards the 20 zone, suggesting that short-term downward momentum continues to prevail. The EUR/USD pair continues to experience significant selling pressure, as the easing of US-China trade tensions and a cautiously hawkish stance from the Federal Reserve create a favorable environment for the US dollar. The current structure indicates a bearish outlook, implying that any short-term recoveries are expected to be corrective in nature within an overarching downtrend, with significant downside targets identified at 1.1488 and 1.1468.