The euro hovers near recent lows, with upside attempts capped below 1.1600. Risk appetite remains subdued as trade tensions between the US and China flare up. Meanwhile, German ZEW data revealed that economic sentiment improved less than expected in October.
Euro stays weak as risk aversion dominates
EUR/USD holds losses for the second consecutive day on Tuesday, trading just below 1.1560 after retesting two-month lows at 1.1542 earlier in the day. A risk-off mood amid renewed concerns about a Sino-US trade war is keeping the euro (EUR) on the back foot, while the German ZEW Economic Sentiment Index has failed to boost confidence.
News that China and the US have raised fees on each other’s vessels has reignited fears of a trade war between the world’s two largest economies. This development undermined earlier optimism after US Treasury Secretary Scot Bessent announced an upcoming meeting between US President Donald Trump and Chinese President Xi Jinping.
In Germany, the ZEW Economic Sentiment Index showed a moderate improvement in October but fell short of expectations. The assessment of the current economic situation deteriorated to its lowest level since May. Earlier data from Destatis confirmed that German consumer inflation accelerated to 2.4% in September from 2.2% in August, in line with the preliminary reading. The euro edged lower following the data release.
Fed speech in focus amid limited US data
The US economic docket remains light amid a data blackout from the federal government. However, Federal Reserve (Fed) Chair Jerome Powell is scheduled to speak later today. In the absence of fresh economic data, his comments are unlikely to shift market expectations of two upcoming rate cuts by the Fed.
Daily digest market movers: the US dollar appreciates amid trade war fears
Market hopes that President Trump’s softer tone toward China might lead to a new phase of de-escalation were dashed by news that China has increased fees on US cargo vessels, prompting expectations of retaliation. Beijing further criticized Washington’s “double standards,” asserting that the US cannot demand dialogue while simultaneously threatening new tariffs.
The tensions stem from China’s recent decision to restrict rare earth exports to Western nations, which was met with Trump’s threat of 100% tariffs on Chinese imports effective November 1. The move rattled markets and initially sent the US dollar tumbling last Friday.
On the macro front, Germany’s ZEW Economic Sentiment Index rose modestly to 39.3 in October from 37.3, but the Current Situation Index fell to -80.0 from -76.4, missing forecasts for a smaller decline. The Eurozone sentiment index also weakened to 22.7 from 26.1, against expectations for an improvement to 30.2.
Earlier data confirmed that Germany’s Consumer Price Index (CPI) rose 0.2% in September, marking a 2.4% annual increase, while the Harmonized Index of Consumer Prices (HICP) matched those figures.
Technical analysis: EUR/USD under bearish pressure below 1.1600
EUR/USD remains under selling pressure after failing to reclaim the 1.1600 level on Monday. Technical indicators on the 4-hour chart show persistent bearish momentum, with the Relative Strength Index (RSI) staying below 50 and the Moving Average Convergence Divergence (MACD) nearing a bearish crossover.
Support at Monday’s low of 1.1542 is holding for now but remains vulnerable as recovery attempts attract sellers. A break below 1.1540 could expose the August 5 low at 1.1530, followed by the base of the descending channel near 1.1525.
To the upside, immediate resistance is at 1.1590, followed by Monday’s high at 1.1630. Further gains may encounter the descending channel’s upper boundary around 1.1680.
