EUR/USD Retreats Below 1.1800 as Dollar Flexes Muscle on Trade Deals, Hawkish Data

Summary:

The Euro surrendered its recent gains against a resurgent US Dollar on Tuesday, breaking back below the key 1.1800 psychological level to trade near 1.1785.

Sell EURUSD

EXP

Trading

1.17900

ENTRY

1.16600

TGT

1.18750

-- -- --

Point

Flat

1.16600

TGT

CLOSING

1.17900

ENTRY

1.18750

In a decisive shift of fortune, the Euro stumbled against a broadly fortified US Dollar during Tuesday’s session, with the EUR/USD pair relinquishing its fragile hold above the 1.1800 handle. As of this writing, the pair trades at approximately 1.1785, a move that underscores the market’s swift reassessment of near-term catalysts and a clear preference for Dollar-denominated assets amid a confluence of supportive developments.

From where I sit, this isn’t merely a technical correction; it’s a testament to the Dollar’s enduring ability to draw strength from multiple fronts—geopolitical, economic, and trade-oriented—even amidst domestic political uncertainty. The narrative from Monday bled decisively into Tuesday’s price action, fueled by two significant pillars.

First, and most tangibly, was the announcement from the White House. President Donald Trump’s revelation of a new trade agreement with India, which will see U.S. tariffs on certain Indian products slashed to 18% from a steep 50%, resonated deeply with the market. This deal, albeit specific, is being interpreted as a strategic de-escalation in global trade tensions and a win for U.S. economic diplomacy. It signals a proactive, deal-making approach that investors have often rewarded with Dollar confidence, easing fears of a protracted, multi-front trade war that could ultimately harm U.S. growth.

Second, and adding a layer of geopolitical risk premium being stripped from the market, were comments from Iran’s newly elected President, Masoud Pezeshkian. His stated willingness to resume nuclear negotiations with the United States provided an immediate, if cautious, sigh of relief. Reduced tensions in the perpetually volatile Middle East traditionally undermine safe-haven flows, but in this configuration, it appears to have removed a potential obstacle to global growth and solidified the Dollar’s position as the beneficiary of a relative improvement in stability.

Beneath these headlines, the macroeconomic foundation for the Dollar’s rally was laid by exceptionally robust data. Monday’s ISM Manufacturing PMI for the US outperformed expectations, painting a picture of a resilient industrial sector. This strength effectively offset simmering anxieties about an impending partial government shutdown—a political headache that, while disruptive, is viewed by the market as a temporary impediment rather than a systemic threat. The strong data reminds everyone that the underlying engine of the US economy continues to fire, keeping the Federal Reserve’s policy trajectory in focus and away from any premature dovish pivot.

The looming partial shutdown, which threatens to delay Friday’s critical Nonfarm Payrolls report, has become a secondary concern for now. The market is choosing to focus on the hard data it has in hand, and that data is Dollar-positive.

Looking ahead, the calendar demands our close attention. Later today, remarks from Federal Reserve Governor Michelle Bowman will be parsed for any nuance on the balance sheet or interest rate path. The spotlight then intensifies on Wednesday with the release of the ADP private employment report, a often-volatile precursor to the official jobs data. A strong reading there could further cement the Dollar’s gains.

However, the real potential for volatility lurks on Thursday with the European Central Bank’s monetary policy decision. The ECB finds itself in a profoundly delicate position, grappling with stagnant growth, dangerously low inflation expectations, and limited policy ammunition. Any hint of further accommodation or a profoundly dovish outlook could exacerbate the Euro’s current weakness. From my analysis, the risk is skewed towards President Christine Lagarde underscoring the Eurozone’s profound economic challenges, a scenario that would likely widen the policy divergence gap with the Fed and pressurize EUR/USD further.

Technical Analysis

From a technical perspective, EUR/USD has shifted decisively into a bearish corrective structure on the 1-hour chart following the breakdown of its previously well-defined ascending trendline. That trendline had underpinned the late-January rally, but the clean violation and subsequent failure to reclaim it signaled a meaningful change in market character rather than a routine pullback.

Price action confirms this deterioration in structure. After breaking the trendline, EUR/USD attempted a corrective rebound but stalled beneath the former support zone around 1.1870–1.1900, which has now firmly flipped into resistance. Repeated rejections from this area highlight strong supply and indicate that bullish attempts are being sold into rather than accumulated.

The pair has since extended lower, slicing through the 1.1820 support region, and is now consolidating below it. This level, which previously acted as a demand zone during the impulsive leg higher, is now reinforcing bearish continuation pressure. As long as price remains below 1.1820, rallies are likely corrective in nature.

A sustained move lower exposes the 1.1740 support zone as the next key downside target. This area aligns with prior consolidation and represents a critical test for bears. A decisive break below 1.1740 would open the door toward the 1.1660–1.1680 region, signaling a deeper retracement of the broader January advance rather than short-term weakness.

On the upside, bulls would need to reclaim 1.1820, followed by a sustained break back above 1.1870, to neutralize immediate downside risks. Until then, overall structure, momentum, and price action favor continued bearish pressure.

TRADE RECOMMENDATION

SELL EUR/USD

ENTRY PRICE: 1.1790

STOP LOSS: 1.1875

TAKE PROFIT: 1.1660

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Warren Takunda

Analysts

Warren Takunda, a seasoned finance leader specializing in the Middle East, is a trusted senior analyst with a proven track record. As head of the finance team, he excels in financial planning, analysis, and reporting. Warren's expertise in financial modeling and investment analysis delivers valuable insights to clients.

Rank

Articless

2085

Win Rate

63.23%

P/L Ratio

0.72

Focus on

XAUUSD, GBPUSD, EURUSD

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