EUR/USD gives back some early gains as US-China trade relations improve

• EUR/USD surrenders some of its initial gains as the US Dollar bounces back due to an improvement in US-China trade relations.
• Beijing has rolled back non-tariff measures on 45 US entities.
• The EU is prepared with countermeasures if trade talks with the US fail.

EUR/USD gives back half of its intraday gains during European trading hours on Thursday. Still, the major currency pair is 0.2% higher, trading just above 1.1200 at the time of writing. The pair faces selling pressure as the US Dollar (USD) recoups some of its initial losses on further de-escalation in the trade war between the United States (US) and China. 

The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, against six major currencies, recovers to near 100.85 from the intraday low of 100.60.

During the European trading session, US Treasury Secretary Scott Bessent stated that Washington is going into a “series of negotiations” with China to “prevent escalation” in trade tensions again. The comments from Bessent have increased investors’ confidence that the world’s two largest powerhouses are actively focusing on reaching a trade deal, a scenario that will lift global economic growth. “We [US] now have a mechanism with China counterparts,” Bessent added.

Before comments from US Treasury Bessent, Beijing suspended non-tariff measures taken against 45 US entities, which it imposed on April 4 after the imposition of reciprocal tariffs by US President Donald Trump on April 2, Reuters reported. The decision from the Chinese Commerce Ministry came in the wake of the agreement between Washington and Beijing for a 90-day pause in the trade war, in which they lowered tariffs by 115%.

Going forward, the next major trigger for the US Dollar will be the speech from Federal Reserve (Fed) Chair Jerome Powell, and the Producer Price Index (PPI) and Retail Sales data for April in North American trading hours. Investors will pay close attention to Powell’s speech to get cues about whether the central bank has changed its monetary policy stance after soft US Consumer Price Index (CPI) data for April and a temporary US-China trade truce.

Daily digest market movers: EUR/USD holds significant intraday gains

• EUR/USD surrenders some of its intraday gains as the US Dollar pares some losses. Meanwhile, the Euro (EUR) trades higher among its risky peers despite European Central Bank (ECB) officials signaling that there is room for more interest rate cuts due to decelerating inflationary pressures.
• On Wednesday, ECB policymaker and Governor of the Bank of France François Villeroy de Galhau stated that protectionist policies announced by the US President Trump administration will lead to a “restart of inflation in its economy, not in Europe”, a scenario that paves the way for another rate cut by the summer. 
• Going forward, the key trigger for the Euro is trade talks between the European Union (EU) and the US, which have not progressed in a while. During European trading hours, German Finance Minister Lars Klingbeil told the parliament that the continent is prepared with countermeasures if talks with the US do not succeed. However, his comments indicated that the EU’s first priority is securing a deal with Washington. “We expect that the negotiations will lead to a good result,” Klingbeil said, adding that “we must respond to the US tariffs with unity and determination.”
• During European trading hours, revised Eurozone Gross Domestic Product (GDP) data for the first quarter have shown that the economy grew at a slower pace of 0.3%, compared to the preliminary estimate and the prior release of 0.4%. Year-on-year, the GDP growth remained 1.2%, as expected. Additionally, the Employment Change in the January-March period has come in higher at 0.3% quarter-on-quarter, compared to flash estimates and the former reading of 0.1%. 

Technical Analysis: EUR/USD struggles around 20-day EMA

EUR/USD rises above 1.1200 on Thursday. However, the near-term outlook of the pair is still uncertain as the 20-day Exponential Moving Average (EMA) is acting as a key barrier around 1.1210.

The 14-period Relative Strength Index (RSI) recovers strongly to 50.00 after sliding to near 40.00, suggesting indecisiveness among traders.

Looking up, the April 28 high of 1.1425 will be the major resistance for the pair. Conversely, the psychological level of 1.1000 will be a key support for the Euro bulls.