Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1543.
- Add a stop-loss at 1.1750.
- Timeline: 1-3 days.
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1750.
- Add a stop-loss at 1.1543.
The EUR/USD pair was flat on Monday morning as traders waited for the upcoming meeting between US and Chinese officials. It also wavered ahead of the upcoming US inflation report. It was trading at 1.1650, a few points above this month’s low of 1.1543.
US and China Trade Talks
The main catalyst for the EUR/USD pair this week will be the upcoming meeting between Scott Bessent and his Chinese counterpart in Malaysia.
The US and Chinese teams will hope to reduce the ongoing tensions between the two countries. Donald Trump has threatened to push tariffs on Chinese goods to over 130% if Beijing moves on with its limits on rare earth materials.
China, on the other hand, is using its leverage on key areas to pressure the US. For example, it has stopped importing US soybeans and opted for alternatives from Argentina and Brazil.
China also believes that it has an upper hand because of its dominant market share in the rare earth materials. Stopping shipments to the US would largely halt the manufacturing industry.
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The other major EUR/USD news will come from the United States, which will publish the September consumer inflation report on Friday. Economists expect the report to show that the headline Consumer Price Index rose to 3.1 in September from 2.9% in the previous month.
If this is correct, it will make it hard for the Federal Reserve to continue cutting interest rates in the next meeting as most officials have hinted.
Cutting interest rates at a time when inflation is rising poses a major risk that prices will keep rising. However, maintaining high interest rates is risky as it means that the labor market will remain under pressure in the coming months. A recent report by ADP showed that the private sector lost 36,000 jobs in September this year.
EUR/USD Technical Analysis
The daily timeframe chart shows that the EUR/USD exchange rate has remained in a tight range in the past few weeks. It was trading at 1.1650, a few points above this month's low of 1.1543.
The pair is consolidating at the 50-day and 100-day Exponential Moving Averages, while the Average Directional Index (ADX) is much lower than the year-to-date high of over 50.
Therefore, the pair will likely remain in this range in the coming days as investors wait for the next catalyst. The key support and resistance levels to watch will be at 1.1543 and 1.1750.
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