EUR/USD is trading at 1.1665 during the early hours of European trading on Monday. The pair experienced a bounce at 1.1650 earlier in the day, buoyed by a somewhat optimistic market mood. However, weaker-than-expected German producer inflation data has hindered any significant upward movement.
The renewed optimism in the market was partly fueled by US President Donald Trump’s acknowledgment on Friday that raising tariffs on China to 100%, a proposition he made two weeks ago, is not feasible. Additionally, US Treasury Secretary Scott Bessent’s announcement that he would meet Chinese Vice Premier He Lifeng this week indicates a potential easing of trade tensions between the United States and China.
Concerns regarding bad loans at regional banks, which had unsettled the markets in the previous week, appear to have subsided, as the quarterly earnings reports from major banks showed strong credit performance and revenue figures. This has contributed to a sentiment shift, putting pressure on the traditionally safe-haven US Dollar.
In the Eurozone, the situation is somewhat different. The German Producer Price Index (PPI) for September contracted 0.1% month-on-month, contrary to expectations for a 0.1% increase. This marks the third consecutive monthly decline and adds downward pressure on the Euro. With a quiet economic calendar in Europe on Monday, focus will be on the speeches from European Central Bank (ECB) board members Isabel Schnabel and Joachim Nagel.
Despite the brighter market atmosphere providing some support to the Euro, the lack of fundamental drivers has left the EUR/USD pair’s recovery somewhat stagnant, leading to price action remaining within Friday’s trading range. Investors are hesitant to sell the US Dollar without more clarity on the US-China trade relationship.
On a positive note, economic figures from China reported a stronger-than-expected Gross Domestic Product (GDP) growth of 1.1% for the third quarter, beating forecasts of 0.8%. Additionally, industrial production and retail sales year-on-year increased significantly, reflecting resilience in China’s economy amid ongoing tariff pressures from the US. This positive sentiment has benefitted Australian and New Zealand Dollars, while weighing down the US Dollar.
From a technical perspective, EUR/USD is currently testing a broken trendline support near the 1.1650 area. While attempts to move higher have been limited, a confirmation below this level could increase bearish pressure, potentially targeting the October 15 low near 1.1600. The 4-hour Relative Strength Index (RSI) indicates a lack of clear market direction, hovering around the 50 level.
Overall, as attention turns to economic indicators and geopolitical developments, the EUR/USD pair’s trading actions are expected to remain closely watched in the coming days, particularly for any signs of volatility or direction shifts.
