EUR/USD held firm near 1.1600 on Wednesday, with limited price movement amid a quiet economic calendar on both sides of the Atlantic. Market participants are awaiting the delayed US Consumer Price Index (CPI) report, scheduled for Friday, which could provide direction for the pair.
The euro has seen muted action, trading with a marginal gain of 0.05%, while the US Dollar Index (DXY), which tracks the greenback against a basket of six major currencies, slipped 0.04% to 98.92.
Geopolitics weigh on the euro
Geopolitical concerns continue to dominate market sentiment. Rising US-China trade tensions and the unresolved Russia–Ukraine conflict are keeping the euro on the defensive. The cancellation of the planned Putin-Trump meeting in Budapest has further capped the euro’s upside.
Reuters reported that the US is considering curbs on exports to China made with US software, adding to global risk aversion and potentially pressuring EUR/USD. Meanwhile, the US government shutdown has entered its 22nd day, with little progress, though House Democratic Leader Hakeem Jeffries hopes for resolution by the end of October.
In Europe, ECB board member Martins Kazaks noted that the next policy move could be either a rate hike or a cut, signaling continued uncertainty in monetary policy.
Key data ahead
Investors are eyeing Friday’s US S&P Global PMIs and September CPI for guidance ahead of the Federal Reserve’s next policy decision. In Europe, Flash PMIs for major economies are expected to provide further insight into the global monetary policy outlook.
According to Reuters, the Trump administration is considering restrictions on a wide range of software-powered exports to China, from laptops to jet engines, in retaliation for China’s recent rare earth export controls. Market participants are focused on these developments as they assess the potential for increased risk aversion.
The Fed is widely expected to cut rates by 25 basis points, bringing the federal funds rate to 3.75%-4%, with markets also pricing in a potential additional 25bps cut in December. The ECB is expected to leave rates unchanged, with odds currently at 98%.
Technical outlook: neutral to bearish
Technically, EUR/USD remains neutral to bearish, trading below the 100-day and 20-day SMAs at 1.1656. The RSI has slipped below the neutral 50 line, suggesting that bearish momentum is building.
Immediate support levels are at 1.1600, followed by 1.1550 and 1.1500. A break below these levels could expose the August 1 cycle low near 1.1391. On the upside, resistance lies at the SMA confluence, followed by 1.1700. A sustained move above this level would open the path to 1.1800 and the July 1 high at 1.1830.
