The EUR/USD pair edged lower toward 1.1635 during the Asian session on Wednesday, pressured by renewed optimism surrounding U.S.–China trade developments and cautious positioning ahead of major central-bank meetings. The Euro (EUR) came under mild selling pressure against the U.S. Dollar (USD) as investors preferred the safety of the Greenback while awaiting the Federal Reserve’s rate decision later in the day and the European Central Bank’s (ECB) policy update on Thursday.
Market sentiment improved slightly after encouraging comments from U.S. officials about progress in trade negotiations with China. That optimism limited demand for the Euro, which typically performs better in risk-on environments, while supporting the Dollar amid shifting global risk flows.
U.S.–China Trade Progress Lifts Dollar Sentiment
U.S. President Donald Trump said on Wednesday that he expects to reduce tariffs on Chinese goods in exchange for Beijing’s pledge to curb exports of fentanyl precursor chemicals. U.S. Treasury Secretary Scott Bessent added that Chinese officials may also agree to increase purchases of U.S. soybeans, cooperate on restricting fentanyl components.
ECB Likely to Hold Rates Steady but Maintain Flexibility
Across Europe, the European Central Bank is also set to meet on Thursday, with analysts widely expecting no change in interest rates for a third consecutive meeting. ECB President Christine Lagarde recently remarked that current policy settings remain “in a good place” and emphasized a data-dependent approach to future decisions.
With eurozone inflation showing signs of moderation and growth gradually stabilizing, the ECB is expected to reaffirm its cautious optimism while stopping short of committing to a specific rate trajectory.
Traders will dissect Lagarde’s comments for any mention of potential policy easing in 2025 or 2026, as recent market pricing now suggests an 80% probability of a rate cut in 2026, a notable shift from September’s hawkish tone.
Technical Outlook: Key Levels to Watch
From a technical perspective, EUR/USD remains under mild pressure after failing to sustain gains above the 1.1700 region earlier this week. Immediate support lies at 1.1600, followed by 1.1565, while resistance can be seen around 1.1680 and 1.1735.
The 14-day Relative Strength Index (RSI) hovers near neutral territory, indicating a lack of strong directional bias in the short term. However, if the Fed surprises with a more dovish-than-expected statement, the pair could regain upside momentum toward the 1.1800 handle.
Until then, range-bound trading between 1.1600 and 1.1750 is likely to persist as investors await fresh catalysts from both sides of the Atlantic.
Dollar Strength Hinges on Powell’s Tone
With back-to-back central-bank meetings and a pivotal U.S.–China discussion, this week could set the tone for global FX markets heading into the final quarter.
If Powell hints that rate cuts may continue into early 2026, the Euro could rebound modestly. However, if he emphasizes inflation persistence and economic resilience, the Dollar’s advantage is likely to hold, keeping EUR/USD under pressure.
For now, traders remain cautious but attentive, navigating between optimism over trade progress and the reality of divergent policy paths between the Fed and ECB.
