EURUSD: BUY 1.1230, SL 1.1190, TP 1.1300 | 13 May 2025

EURUSD:

EUR/USD is retreating from the gains made in the previous session, trading near 1.1240 in Monday's Asian session. The euro (EUR) has been under pressure since European Central Bank (ECB) official Olli Rehn said last week that the ECB may consider cutting interest rates at its next meeting, provided that upcoming forecasts confirm a continued trend of disinflation and slowing economic growth.

Despite this, EUR/USD found some support thanks to optimism surrounding the US-China trade talks that took place in Geneva. Both sides reported “substantial progress” after two days of talks aimed at de-escalating the ongoing trade dispute. Chinese Vice Premier He Lifeng called the talks an “important first step” in stabilizing bilateral relations, while U.S. Treasury Secretary Scott Bessent echoed his sentiment, noting significant progress.

Markets are now awaiting Washington's response to the European Commission's proposed countermeasures against U.S. tariffs. On Thursday, the Commission launched a public consultation that outlined potential tariffs on up to 95 billion euros worth of imports from the U.S. if trade talks break down.

Meanwhile, the U.S. economic outlook remains uncertain. Federal Reserve (Fed) officials have noted the risk of stagflation, and Fed Chairman Michael Barr has warned that higher tariffs could disrupt supply chains, leading to higher inflation, lower growth and higher unemployment. Investors remain cautious as further escalation of trade tensions could pose serious problems for the US economy.

Trading recommendation: BUY 1.1230, SL 1.1190, TP 1.1300

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