• The EUR/USD outlook is weak amid trade optimism and dollar strength.
• US-China trade optimism can stabilize the markets.
• The Fed’s cautiousness and the ECB’s dovish tone can further weaken the Euro.

The EUR/USD outlook turns mildly bearish after breaking the 1.1200 handle briefly during Friday’s Asian session. The downtick move came amid the dollar’s renewed strength and trade optimism.

The pair trimmed losses and gained to the 1.1250 area but remains under pressure due to trade developments and stronger US jobs data. President Trump announced a major trade deal with the UK, though the 10% tariffs stay in place. The partial agreement triggered a modest uptick in the dollar.

Market sentiment also improved due to the US-China trade talks scheduled on May 10 in Switzerland. Though both sides have tempered expectations, the resumption of negotiations offers stability to the global markets.

Meanwhile, President Trump maintains a strong stance against China and reinforced it by appointing a new envoy to Beijing. The President also stated that they won’t offer too many exemptions, which signaled caution.

On the data front, the initial jobless claims data from the US dropped to 228k from the previous 241k. Continuing claims also declined by 29k to 1.879 million. Insured employment rate remains constant at 1.2%. These figures show a resilient jobs market, allowing the Fed to maintain interest rates higher for longer.

On the other hand, the Euro remains vulnerable as the ECB is more dovish now. The central bank is expected to cut another 25 bps by June. The ECB officials remain concerned about the Eurozone’s economic outlook, even though they are confident in achieving the inflation target by year-end.

Key events for EUR/USD

• FOMC member Waller speaks
• Trade headlines

EUR/USD technical outlook: Selling pressure

(Click on image to enlarge)

EUR/USD 4-hour chart

The 4-hour chart for the EUR/USD shows a mild recovery from the daily lows around 1.1200. The RSI has picked up from the oversold zone but still lies under 50—0, which shows selling pressure.

The price is settled well below the 30-period SMA, which is another indicator for a sell-off. However, as long as the 1.1200 handle is protected, the price may recover towards the yearly highs. Breaking the level could lead to 1.1100.

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