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The Euro shows a mild bearish response to the announced US-China trade agreement.
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Uncertainty persists due to the vague details of the deal, casting doubt on its significance.
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EUR/USD continues to trade sideways, seeking direction within the 1.1375–1.1455 range.
EUR/USD edged lower on Wednesday, trading just above 1.1400, as the US Dollar gained strength following reports that the US and China have agreed on a framework to reduce trade tariffs.
The tentative deal still requires approval from US President Donald Trump and Chinese Premier Xi Jinping. However, the lack of concrete details has limited market enthusiasm, with investors reacting cautiously.
Skepticism surrounds the agreement, as it retains many existing tariffs—albeit at reduced levels—and provides little assurance of long-term stability. As a result, EUR/USD remains range-bound, fluctuating within the 1.1375–1.1455 zone that has held for the past two weeks.
US Commerce Secretary Howard Lutnick confirmed that both countries aim to return to the previously abandoned Geneva consensus, which broke down amid US concerns over China’s restrictions on rare earth exports.
In parallel, a US federal court has decided that Trump’s broadest tariffs will remain in place temporarily, pending a final ruling on a recent lower court decision that deemed them illegal.
Looking ahead, the spotlight is on the release of May’s US Consumer Price Index (CPI) later today. The data is expected to indicate a moderate uptick in inflation, which could rekindle stagflation worries and influence USD sentiment further.
Daily Market Digest: Cautious Sentiment Prevails Ahead of US CPI Release
- Markets remain in a cautious mood on Wednesday, with attention firmly centered on the upcoming US Consumer Price Index (CPI) data. The recently concluded US-China trade talks resulted in a basic framework agreement that effectively restores the status quo reached during last month's Geneva consensus. However, the market reaction has been lukewarm due to the limited scope and lack of detail in the agreement.
- The May CPI report is expected to show a steady 0.2% month-over-month rise, with annual inflation accelerating to 2.5% from 2.3% in April. Any deviation from these forecasts could significantly influence the Federal Reserve’s near-term monetary policy stance. While markets widely expect the Fed to keep rates unchanged in June and July, there is uncertainty around a potential move in September, with futures markets currently split.
- Also in focus is a $39 billion auction of 10-year US Treasury bonds. Given ongoing concerns about US fiscal health, investors will be closely watching the level of demand—especially from indirect bidders, who accounted for 71% of purchases in the May auction. A sharp drop in participation could put additional pressure on the US Dollar.
- In Europe, investor sentiment showed a strong rebound in June, with confidence rising to 0.2 from -8.1 in May and -19.5 in April, reflecting improved optimism about the Eurozone's economic prospects. Meanwhile, ECB policymaker Olli Rehn emphasized the importance of maintaining inflation near 2% and cautioned against complacency—comments that align with ECB President Christine Lagarde’s stance and temper expectations of further easing in the near term.
Technical Analysis: EUR/USD Stuck Below 1.1455 as Bulls Lose Steam
EUR/USD continues to consolidate following its late-May rally, with the pair stuck in a tight 80-pip range just below the 1.1455 resistance level since early June. On the 4-hour chart, the Relative Strength Index (RSI) is hovering around the neutral 50 mark, while the recent rejection near 1.1500 and bearish divergence signals suggest that bullish momentum is fading.
The pair is currently hovering above 1.1400, with key support at 1.1375—the lows from June 6 and 10. A clear break below this level would indicate a deeper correction toward 1.1315 (May 30 low) and potentially the 1.1215–1.1220 zone (lows from May 20 and 28).
To the upside, immediate resistance lies at the June 3 high of 1.1455, followed by 1.1495—the high from June 5. A breakout above these levels would be needed to revive bullish momentum and target the psychological 1.1500 level.
