The Euro remains below 1.1600 as the US Dollar strengthens, influenced by concerns about a trade war due to US threats of limiting software exports to China. The Eurozone Consumer Confidence data release garners attention, but market volatility is low, with an eye on US inflation and Federal Reserve actions.

EUR/USD trades at 1.1590, slightly down from a previous high of 1.1620, reflecting moderate effects from US-China trade tensions. With no key economic reports amid the US government shutdown, trade issues primarily influence market moves, although expectations remain positive for US-Chinese discussions.

ECB Speeches and Data Releases

European Central Bank (ECB) speeches and data releases, including the Eurozone’s Consumer Confidence index, are significant. Meanwhile, US Federal Reserve indicators and officials’ speeches are set to influence USD movements.

The US Dollar gains strength on potential software trade restrictions against China, with US leadership expressing optimism about resolving trade disputes. In Europe, ECB Vice President de Guindos comments on balanced inflation risks, and markets await Friday’s delayed US CPI report, predicting 3.1% yearly inflation.

Technical analysis indicates EUR/USD hovers above the 1.1580 support area, facing resistance at 1.1620. The Relative Strength Index (RSI) and MACD suggest negative momentum, with possible downside targeting 1.1545 and 1.1455 areas, while upside challenges sit at 1.1625, 1.1650, and 1.1728.

Dollar Strength and Trade Fears

The EUR/USD pair is struggling below the 1.1600 level, pressured by a stronger US Dollar. This dollar strength comes from renewed US-China trade fears, a dynamic we’ve seen before. The market is quiet for now, but everyone is waiting for US inflation data and guidance from the Federal Reserve.

The upcoming Eurozone Consumer Confidence report is unlikely to help the Euro much. Looking back, we see that confidence has been persistently weak, hovering in a dismal range around the -15 level for much of the time since the post-pandemic recovery stalled in 2023. Another weak reading will only confirm the underlying economic sluggishness in the Euro area.

Renewed threats of US export curbs on China are making the dollar a safe place to be. We saw a similar story play out during the trade disputes of 2018-2019, where uncertainty consistently benefited the dollar. Even though officials are talking, the risk of escalation is pushing capital towards US assets.

All eyes are on the upcoming US Consumer Price Index (CPI) report, which is expected to show inflation remains sticky. After the long battle to bring inflation down from the 9% peaks we saw in 2022, a reading near 3.1% keeps the pressure on the Fed. While the market hopes for an interest rate cut, these inflation numbers make that a difficult decision for the central bank.

With market volatility currently low, derivative pricing is relatively cheap. This presents an opportunity for traders who expect a downward move in EUR/USD. Buying put options on the Euro allows for a position that profits from a decline, with risk limited to the premium paid.

Given the technical picture, a break below the 1.1580 support level could be a key trigger. Traders could consider using puts or put spreads to target lower levels like 1.1545 or even the channel bottom near 1.1455. This strategy provides a defined-risk way to act on the prevailing bearish sentiment.

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