• The EUR/USD outlook shows optimism over the ongoing trade talks between China and the US.

• Market participants are eagerly awaiting the US inflation report.

• Traders expect the next Fed rate cut in October. 

The EUR/USD outlook shows optimism over the ongoing trade talks between China and the US, which is supporting the dollar. However, the price continues to fluctuate as the outcome of the talks remains uncertain. At the same time, market participants remain cautious ahead of the US inflation figures. 

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Trump recently accused China of violating some of the requirements in the trade deal with the US. This raised concerns about a potential resurgence of trade tensions. However, a call between the two top leaders resulted in an agreement to hold talks in London. If these talks are successful, the dollar will rally. The opposite is also true. 

Meanwhile, with no immediate catalysts, market participants are looking forward to the US inflation report. Soft numbers will increase bets for Fed rate cuts. On the other hand, if inflation is hot, policymakers will find more reason to delay rate cuts. 

Last week, the US released an upbeat employment report, which led to a decline in expectations for a Fed rate cut. Traders now expect the next cut in October.  Meanwhile, in the Eurozone, traders are pricing a looming end to the ECB’s easing cycle.

EUR/USD key events today

Market participants do not expect any key reports from the Eurozone or the US. Therefore, the pair might consolidate ahead of inflation figures.

EUR/USD technical outlook: SMA break signals sentiment shift

On the technical side, the EUR/USD price has broken below the 30-SMA, indicating a bearish shift in sentiment. At the same time, the RSI has broken below 50, showing stronger bearish momentum. 

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Bulls have been in the lead, keeping the price mostly above the 30-SMA. However, bears punctured the SMA once before the price broke back above. This was the first sign that bullish momentum was easing. After that, bulls tried but failed to break above the 1.1450 key resistance level. Instead, the price made a large wick above the level, indicating a rejection. 

Moreover, the RSI made a bearish divergence, showing fading bullish momentum. As a result, the price broke below the 30-SMA. If bears maintain this new move, the price will likely drop to retest the 1.1250 key support level.

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