EUR/USD firms ahead of ECB meeting

Trade Agreement in Sight

President Trump has suggested that the tariffs set to take effect in early August would not drop below 15%. The US administration recently finalised a trade agreement with several Asian countries (most notably Japan) which agreed to implement tariffs between 15% and 20%, including on autos, a sector that constitutes a large portion of the U.S. trade deficit to Japan.

Risk appetite improved today on reports suggesting the US may soon reach a similar trade agreement with the European Union. Such a deal could impose a 15% tariff on European exports to the US, including cars. If finalised, the agreement would likely prevent the EU from enacting retaliatory tariffs on €100 billion worth of US exports and help avoid further escalation, such as potential taxes on American tech companies.

What’s Driving the Euro Price Today?

Preliminary Purchasing Managers’ Index data for July showed signs of improvement across the eurozone’s manufacturing and services sectors. The manufacturing PMI rose from 49.5 to 49.8, beating expectations of 49.7 and moving closer to the expansion threshold of 50. Meanwhile, the services PMI increased from 50.5 to 51.2, also exceeding expectations of 50.6, indicating a modest but encouraging economic rebound.

Markets are now focused on the European Central Bank’s interest rate decision, due later today. The ECB is widely expected to keep rates unchanged at 2%, as inflation remains anchored at target levels and current interest rates are considered near neutral (neither stimulative nor restrictive). Additionally, the ECB is likely to wait for more clarity on the outcome of US-EU trade talks before adjusting its monetary policy stance.

EUR/USD Price Technical Outlook

On May 12, the EUR/USD tested the 50-day moving average and closed above it, signaling the start of an upward trend. Since then, the pair has formed a series of higher highs and higher lows, reaching multi-year highs earlier this month.

Currently, the price is trading above the ascending trendline emerging from the May 16 low and appears to be heading toward the high end of the current trading zone spanning between 1.1715 and 1.1860.

A daily close above 1.1860 suggests a stronger uptrend and could pave the way for a further rise toward 1.2113. In this scenario, the psychological resistance level at 1.2000 should be closely monitored.

Downside Scenario

Conversely, a daily close below 1.1715 would suggest a weakening bullish momentum and could trigger a correction move toward 1.1510. In that case, the support level at 1.1570 should be watched closely.

EUR/USD – Daily Price Chart

Chart Source: ADSS Platform