The four-week-long southern impulse we saw in EUR/USD has fully faded. Last week, sellers pushed the pair to a monthly low at 1.1066, but then seemed to "fear their own success" and rushed to lock in profits. As a result, buyers seized the initiative, closing the week at 1.1165.

Today, the pair has returned to the 1.1300–1.1400 range, where it had previously hovered before the Geneva meeting between high-ranking U.S. and Chinese officials. That meeting led to a temporary trade truce, which initially gave strong support to the dollar. However, the market quickly priced in this factor. Dollar bulls needed further positive news—but it never came. On the contrary, recent developments suggest that tensions between Washington and Beijing remain high. In response to this shift in sentiment, the U.S. Dollar Index has been plummeting for three straight days, approaching the 99.00 handle.

Broadly speaking, the main reason for the dollar's decline is growing skepticism about a "quick deal" with China. Similar concerns apply to negotiations with the European Union, which have now entered their sixth week. Judging by the "soft threats" from the White House, these talks appear to be stalling. Brussels has not made the same progress as countries like South Korea, Vietnam, or Japan. Negotiations with those countries are ongoing, but so far, only the UK has signed a deal—and on unfavorable terms for itself.

U.S.-China relations are also rocky. While the Geneva meeting sparked some optimism, subsequent events have disappointed markets. The optimism has been replaced—again—by cautious pessimism. First, there is no clear information about whether the talks are actually progressing. Second, a new rift has emerged: last week, the U.S. Bureau of Industry and Security banned third countries from using Huawei's Ascend AI chips, citing violations of U.S. export controls. In response, a Chinese government spokesperson accused the U.S. of abusing export restrictions and "violating agreements reached during the Geneva trade talks."

In other words, the very "negotiation track" that had supported the greenback last week is now dragging it down. Traders have not seen any "light at the end of the tunnel," while existing tariffs—even in their reduced form—continue to weigh on the U.S. economy. Notably, the United States has now definitively lost its AAA credit rating. Top rating agencies S&P and Fitch downgraded U.S. debt in 2011 and 2023, respectively. Now Moody's has joined its peers.

Meanwhile, debates around the new U.S. tax relief bill continue. Progress has stalled due to disagreements among Republican lawmakers. Although many analysts believe the bill will ultimately pass this year, the unexpected pause has triggered volatility in the markets.

All of these events have come together like pieces of a puzzle—forming a picture that is highly unfavorable for the U.S. dollar.

The dollar could regain strength and bring EUR/USD back to the 1.10–1.11 range—but only under one condition: a breakthrough in U.S.-China and U.S.-EU trade negotiations. For now, the lack of information around these talks is working against the greenback. All other fundamental factors—even major macroeconomic reports or central bank speeches—are playing a secondary role.

Technical Outlook

On the daily chart, EUR/USD has broken through the 1.1280 resistance level, which corresponds to the middle line of the Bollinger Bands indicator on the D1 timeframe. Buyers are now attempting to consolidate above the next intermediate resistance at 1.1330 (the Kijun-sen line on the same timeframe). If the pair successfully holds above this level, the Ichimoku indicator will generate a bullish "Line Parade" signal, confirming the strength of the uptrend.

Long positions should be considered only once buyers clear this key resistance. The main target for the northward move lies at 1.1450—the upper Bollinger Band on the daily chart.