EUR/USD appreciates within range as the market digests Trump latest tariff threats

• The Euro appreciates on a brighter market mood and hopes of the EU reaching a trade deal with the US.
• The US Dollar pulled back after the FOMC minutes, which heightened hopes of interest rate cuts this year.
• EUR/USD remains trapped within a bearish channel, below the 1.1750 trendline resistance.

The EUR/USD pair advances on Thursday with a moderate risk appetite returning to the markets. Investors remain hopeful that the worst tariff scenario is still avoidable, and the focus has shifted back to monetary policy, with growing hopes of Federal Reserve (Fed) interest-rate cuts, putting some pressure on the US Dollar.

The Euro (EUR) met buyers right below 1.1700 on Wednesday, paring some losses and returning to the mid-range of the 1.1700s, as the pair trades at 1.1740 at the time of writing. From a wider perspective, however, the bearish structure from the July 1 highs remains in play.

News reports about the trade negotiations between the European Union (EU) and the US are positive, and markets remain hopeful that the bloc might skip the 10% baseline tariff. US President Donald Trump noted the EU's constructive attitude, and the European trade chief, Maros Sefcovic, affirmed that a trade deal might be announced in the coming days.

In the US, the minutes of the last Fed meeting revealed that most committee members see it appropriate to lower interest rates in the coming months. This, and a strong US 10-year bond auction on Wednesday, contributed to pulling treasury yields down, easing the US Dollar's (USD) bullish momentum.

Earlier on Thursday, German Consumer Price Index (CPI) data confirmed that monthly inflation remained flat in June. Later today, European Central Bank Speakers might give some insight about the bank's monetary policy stance, while in the US, the main attraction on Thursday will be the Weekly Jobless Claims release.

Daily digest market movers: The Euro advances as trade fears ease

• The Euro is drawing support from a more contained market reaction to Trump's latest tariff salvo and higher hopes that a deal between the EU and the US is still possible. Comments from both sides have been upbeat, and the August 1 deadline is still weeks away. Investors' optimism is likely to keep the common currency buoyed in the next sessions.
• On Wednesday, the FOMC minutes showed diverging visions among the committee, with most policymakers foreseeing at least one rate cut this year as, in their opinion, the tariffs' impact on inflation will likely be temporary, while the labor market is showing signs of cooling.
• The Fed minutes heightened hopes of an interest rate cut in September. The CME Group's Fed Watch Tool shows a 72% chance of at least 25 bps cuts after the summer, up from less than 65% before the minutes were released. Chances of a July cut remain practically unchanged at 6%.
• US Treasury yields pulled back on Wednesday, with the benchmark 10-year yield easing about 10 basis points from Tuesday's highs following an auction for $39 billion worth of US bonds, which saw a stronger-than-expected demand.
• In the Eurozone, German CPI data confirmed that inflation stalled in June compared with the previous month and the yearly rate eased to the ECBs 2% target. The data had a slightly negative impact on the Euro.

EUR/USD remains trapped within a descending channel

EUR/USD's upside attempts remain capped below the descending trendline resistance from July 1 highs, now at the 1.1760 area. This keeps the price action trapped within a broadening wedge pattern, a figure that reflects an emotional market and that often appears at major tops.

Above here, the high from July 4 and 7 at 1.1790 is likely to challenge bulls ahead of the multi-year high of 1.1830.

The Relative Strength Index (RSI) on the 4-hour chart is fluctuating around the 50 level, suggesting that the pair keeps looking for direction, while the 1.1680 area – where the 38.2% Fibonacci retracement level of the June 24 - July 1 rally meets the July 7 and 8 lows – provides significant support.

A bearish reaction below here would increase pressure towards the 1.1630-1.1645 area, where previous highs meet the 50% Fibonacci retracement level of the mentioned late June rally.

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