EUR/USD started the week on the back foot, sliding toward the 1.1600 handle and extending Friday’s retreat from highs above 1.1650. A cautious market tone is giving the US Dollar fresh support as investors wait for a batch of delayed US economic releases that could reshape expectations for the Fed’s rate path.
Earlier in the session, ECB Vice President Luis de Guindos reiterated confidence that Eurozone inflation is on course to converge toward the bank’s price-stability target. However, his warning on tariff risks, sovereign debt pressures, and the possibility of an abrupt sentiment shift did little to ease downside pressure on the Euro.
In the US, President Donald Trump rolled back tariffs on over 200 products -such as coffee, bananas, and orange juice – acknowledging the inflationary impact of higher import costs following a series of Democratic gains in local elections. Market reaction was muted.
Later today, the European Commission will publish its latest Eurozone Economic Growth Forecasts, which could offer new direction for the single currency. Investors will then turn their attention to the US Empire State Manufacturing Index, followed by speeches from several Fed officials including Vice Chair Philip Jefferson, New York Fed President John Williams, Minneapolis Fed President Neel Kashkari, and Governor Christopher Waller.
Market movers: risk-off tone keeps USD supported
The Euro is extending losses for a second straight session as traders hesitate to add risk exposure ahead of incoming US data that could clarify economic momentum and the Fed’s easing timeline. Fed policymakers last week emphasized upside inflation risks while downplaying labour market concerns, pushing rate-cut expectations further out. According to CME FedWatch, the probability of a December cut has fallen to 43%, from 60% a week ago and over 90% a month earlier.
In Asia, comments from Japanese Prime Minister Sanae Takaichi—stating that a Chinese attack on Taiwan would provoke a military response—sparked geopolitical jitters and hit risk appetite. China meanwhile urged its citizens to avoid travel to Japan, further souring sentiment.
Italian CPI figures confirmed preliminary estimates, showing monthly inflation contracting 0.3% in October (vs. -0.2% in September) and easing to 1.2% year-on-year from 1.6%.
Later in the US session, the Empire State Manufacturing Index is expected to reveal a mild deterioration in business conditions, with consensus looking for a decline to 6.1 in November from 10.7 previously.
Technical analysis: EUR/USD retreat deepens after failing to break channel resistance
EUR/USD has once again failed to break above the upper boundary of the descending channel drawn from early-October highs, prompting renewed downside momentum. While sellers have not yet forced a clean break below 1.1600, momentum indicators are turning increasingly bearish.
The 4-hour RSI is testing the key 50 threshold, while the MACD has slipped below its signal line—suggesting scope for a deeper pullback.
Immediate support lies at 1.1595–1.1600. A clear break lower would expose the November 7, 10, and 11 troughs at 1.1535–1.1545, followed by the November 5 low near 1.1470. On the topside, initial resistance stands around 1.1640, followed by the October 28–29 highs near 1.1670. A decisive move above these barriers would signal a shift in market structure and open the door toward the October 17 peak at roughly 1.1730.
