The Euro edges higher in subdued Monday trading amid optimism over Ukraine peace talks and hopes for progress in US-China trade negotiations. With US inflation data due Tuesday, markets remain cautious, keeping EURUSD within a familiar range.
Calm Before the Data Storm
EURUSD is trading modestly higher around 1.1670 in the early European session, gaining on a light-volume day as Japanese markets remain closed for a holiday. The uptick supported by a moderate risk-on sentiment, as geopolitical tensions ease slightly on reports of a potential peace deal in Ukraine.
The anticipated meeting between US President Donald Trump and Russian President Vladimir Putin with European leaders pushing to include Ukrainian President Volodymyr Zelensky has boosted hopes for diplomatic progress. While details remain sparse, any concrete steps toward peace would likely bolster the Eurozone’s economic outlook and investor sentiment.
US CPI in Focus as Inflation Pressures Build
Monday’s economic calendar in the Eurozone relatively quiet, featuring only Italian CPI and trade balance data. The CPI report expected to confirm a 1% monthly contraction in July and a year-on-year slowdown to 1.7% from 1.8% in June. Trade balance figures are forecast to show a wider surplus of EUR 7.12 billion, up from EUR 6.16 billion in May unlikely to cause major market moves.
The real market driver comes Tuesday with the release of the US Consumer Price Index (CPI). Inflation expected to have accelerated to 2.8% year-on-year in July from 2.7% in June, while the core CPI is seen ticking up to 3% from 2.9%. Stronger-than-expected figures could dampen expectations of a September Federal Reserve rate cut, potentially lifting the US Dollar and pressuring EURUSD.
Trade Negotiations Add a Layer of Uncertainty
Beyond inflation, traders are closely following US-China trade negotiations as the August 12 deadline for tariff escalation approaches. Talks are reportedly stuck over US restrictions on AI chip exports, but markets are cautiously optimistic that both sides could agree to extend the truce.
A trade deal or even an extension could sustain risk appetite and keep the USD under moderate pressure in the short term. However, a breakdown could reverse sentiment rapidly, triggering safe-haven flows into the Greenback.
Technical Outlook: Bulls Capped at 1.1710
From a technical perspective, EURUSD remains rangebound.
Resistance: The 1.1700–1.1710 zone has capped bullish attempts in recent sessions. A sustained break above this region could open the door toward 1.1745 and 1.1780.
Support: Immediate support lies at 1.1645, followed by the 1.1620 region. A drop below could target the 1.1590 area.
Momentum: The pair’s short-term momentum indicators are neutral, reflecting the lack of strong directional conviction ahead of key events.
Traders may prefer to wait for Tuesday’s US CPI before committing to larger positions, keeping intraday volatility contained.
Market Sentiment: Mild Risk-On Tone
The US Dollar Index is trading with a mild bearish bias, consolidating within the range of the past two sessions. The Euro remains the strongest against the New Zealand Dollar in today’s heat map, while the USD is showing mild weakness against most majors.
A positive outcome in Ukraine peace talks and trade negotiations could extend EURUSD’s upside, but without a clear catalyst, the currency pair is likely to remain in its current range.
